To our valued clients,

Businesses that together with their affiliates accepted Paycheck Protection Program (PPP) funds of less than $2 million will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith, according to guidance posted by the U.S. Small Business Administration (SBA) on Wednesday.

The guidance, provided as Question 46 in Treasury’s Q&As related to the PPP, states that borrowers with loans of more than $2 million may still have an adequate basis for making the required good-faith certification, based on their individual circumstances and the language of the certification and SBA guidance.

On April 23, the SBA had warned that businesses with substantial access to liquidity may not qualify for PPP loans, and several larger companies returned their PPP funds. On April 28, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced that the SBA would review all PPP loans in excess of $2 million to make sure borrowers’ self-certification for the loans was appropriate.

Out of concerns whether their loans would be deemed appropriate, some larger companies that initially received PPP funds have returned them. For the same reason, some leaders of smaller companies have also considered returning their PPP funds or hesitated to apply for PPP loans.

According to the SBA, borrowers with loans below the $2 million threshold are less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers who obtained larger loans.

The SBA said the safe harbor will promote economic certainty for PPP borrowers with limited resources as they work to retain and rehire employees. The $2 million threshold also will help the SBA conserve its resources and focus its reviews on larger loans.

At this point, this safe harbor only applies to “certification” as all other loan forgiveness rules and regulations are still required.

Please call your trusted Machen McChesney advisor if you have any questions.