SBA Provides PPP Borrower "Need" Certification Safe Harbor Relief

May 13, 2020

SBA Provides PPP Borrower

On May 13, the Treasury Department and SBA released FAQ #46 providing safe harbor relief and additional clarifications relating to the SBA review of Payroll Protection Program (PPP) borrower “need” certifications. Specifically, FAQ #46 provides that “[a]ny 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.”

The SBA has recognized that borrowers with loans under the $2 million threshold are generally less likely to have had access to adequate sources of liquidity. Initially outlined in FAQ #31 and in later public pronouncements, the Treasury Department and SBA indicated that they would review or audit borrowers based on the good-faith certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” These previous pronouncements did not contain compliance guidelines and have created significant borrower confusion.

The SBA will continue to audit borrowers with loans greater than $2 million, though FAQ #46 recognizes that “[b]orrowers with loans greater than $2 million that do not satisfy 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.” Any determination by SBA that a borrower lacked an adequate basis for the required “need” certification will result in a repayment request and lender notification that the borrower is not eligible for forgiveness. No additional enforcement remedies will be pursued for borrowers who repay their loan following a repayment request.

Marks Paneth will continue to monitor developments and will provide updates as they become available. Contact your Marks Paneth advisor if you need additional information or assistance or email     

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