SBA extends 'safe harbor' to some PPP borrowers

NCPA May 13, 2020

On Wednesday, the SBA issued guidance extending an automatic safe harbor to borrowers receiving PPP loans with an original principal amount of less than $2 million. These borrowers "will be deemed to have made the required certification concerning the necessity of the loan request in good faith." SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

The guidance comes shortly before a May 14 deadline for PPP borrowers who did have access to other sources of capital to return funds. Find more information here and here.

NCPA