SBA Provides New Safe Harbor for PPP Loans, Extended Repayment Date

Ever since the Coronavirus Aid, Relief and Economic Security (CARES) Act introduced the Paycheck Protection Program (PPP) in late March 2020, the U.S. Small Business Administration (SBA) continues to release piecemeal guidance to the public. 

One major concern for the borrowers is whether they had met the requirement that the loan was necessary, as borrowers not meeting the necessity requirement could be subject to fines and criminal prosecution. The necessity requirement was announced by the SBA in a Frequently Asked Question (FAQ) #31 on April 23, 2020. It states that borrowers must certify in good faith that their PPP loan request is necessary. 

Specifically, all borrowers must certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

The SBA in its latest post on May 13, 2020, added FAQ #46. In this FAQ, the SBA provided a safe harbor to certain borrowers. It states that any borrower, together with its affiliates, that received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required good faith necessity certification.

Borrowers with loans greater than $2 million that are not covered by this safe harbor may still have 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. 

And, prior to the latest update from the SBA, borrowers of the PPP loan who believed that they might not meet the certification criteria were given a chance to return the loan in full by May 14, 2020. Borrowers taking such action will be deemed by SBA to have made the required good faith certification concerning the necessity of the loan to avoid fines and criminal prosecution. In the SBA’s newest update, the SBA added FAQ #47 that extended the safe harbor repayment date to Monday, May 18, 2020, to give borrowers an opportunity to review and consider FAQ #46.

In the event the repayment isn’t made by May 18, 2020 and the SBA determines in its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, FAQ #46 indicates that SBA will seek repayment of the outstanding PPP loan. SBA will not pursue administrative enforcement or referrals to other agencies if the borrower repays the loan after receiving notification from the SBA.

To read the entire FAQs 46 and 47, click here and go to page 16.

If you have questions, please contact your LvHJ engagement team lead, or email us at

You may also be interested in this blog post about key CARES Act tax provisions for businesses and individuals.


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