Deadline to Return PPP Loans Extended One Week

The government has provided more time for borrowers to assess whether their loan under the Paycheck Protection Program (PPP) was necessary and whether they need to return it.

 

In a May 6 update to their Frequently Asked Questions (FAQs), the Small Business Administration and Treasury Department advised that they are extending the repayment date safe harbor to May 14, 2020. 

After reports surfaced that many large companies that didn’t necessarily need funding were taking advantage of the loan program, the SBA and Treasury announced that the agencies would begin a review of all loans in excess of $2 million, following the lender’s submission of the borrower’s loan forgiveness application.

 

“We have noted the large number of companies that have appropriately reevaluated their need for PPP loans and promptly repaid loan funds in response to SBA guidance reminding all borrowers of an important certification required to obtain a PPP loan,” explains an April 28 statement by Treasury Secretary Steven Mnuchin and Small Business Administrator Jovita Carranza.

 

The FAQs note that, in addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must “assess their economic need” for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application and certify in good faith that their PPP loan request was necessary.

 

The FAQs note, for example, that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith and such a company should be prepared to demonstrate to SBA the basis for its certification. 

 

The SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7—now extended to May 14—will be deemed by SBA to have made the required certification in good faith. The SBA also indicated that it intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

 

The FAQs also advise that an employer that repays its PPP loan by the May 14 safe harbor deadline will be eligible for the Employee Retention Credit.

 

The guidance explains that an employer that repays the loan by the safe harbor deadline will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Accordingly, the employer will be eligible for the credit if it otherwise is an eligible employer.