Companies taking out Paycheck Protection Program loans must certify that they need the loan to operate. However, a safe harbor was released on Twitter Wednesday by the US Small Business Administration and the US Department of Treasury that loans under $2 million will be deemed to have been taken out in good faith.
“Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith,” according to the document.
Loans below $2 million are considered as going to companies less likely to have had access to adequate sources of liquidity during this Covid-19 crisis, according to the SBA.
It also noted that for borrowers with loans greater than $2 million, there may still be an adequate basis for making the “required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.”
If the SBA determines the borrower lacked adequate basis that they needed the loan, the agency will seek repayment. However, “if the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”
The full document is online. And more information on PPP loans is available in this Staffing Industry Review Online story. More on the safe harbor announced Wednesday by the SBA is available in the Journal of Accountancy.