May 13, 2020

This morning, the Small Business Administration (SBA) issued new guidance regarding Paycheck Protection Program (PPP) attestations and access to other capital.

Specifically, question 46 states that borrowers who received a PPP loan totaling less than $2 million will be automatically deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA states that this safe harbor is appropriate because borrowers who received loans below the $2 million threshold are generally less likely to have access to other sources of liquidity in the current economic downturn.

Additionally, as we’ve previously discussed, the SBA plans to audit all PPP loans greater than $2 million to ensure proper compliance and said the agency will pursue enforcement actions for noncompliance. Per this new guidance, however, SBA states that if it determines in the course of an audit that a borrower lacked an adequate basis for the required certification, the SBA will seek repayment of the outstanding loan and notify the lender that the loan is not eligible for forgiveness. If the borrower repays the loan after receiving this notification, the SBA will not pursue any legal or administrative enforcement actions against the borrower.

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