The May 18 extension for the return of PPP funds is provided in the SBA’s answer to Question 47 of the FAQs.
Back on April 23, the SBA issued FAQ #31 to clarify that businesses may not qualify for PPP loans if they already had substantial access to liquidity and to remind borrowers of their obligation to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations.” Following that guidance, the agency added FAQ #39 on April 29 indicating that the SBA would be auditing recipients of all PPP loans in excess of $2 million to ensure the appropriateness of borrowers’ self-certifications. The SBA initially indicated that borrowers would have until May 7 to return the loans if, after review, they determined that they were unable to make the good-faith certification. That deadline was subsequently extended to May 14.
Under the SBA’s new guidelines, borrowers now have until Monday, May 18 to return PPP funds. Any borrower that returns PPP funds in full by May 18 will be deemed by the SBA to have made the certification regarding the economic necessity for the loan in good faith. Borrowers need not apply for the extension; the SBA indicated that it would be implemented through a revision to the Interim Final Rule providing the safe harbor.
Earlier this week, the SBA had added FAQ #46 to provide a safe harbor for any PPP borrower who, along with its affiliates, received PPP funds with an original principal amount of less than $2 million. Such borrowers would be deemed to have made the certification concerning loan necessity in good faith. The extended May 18 deadline for returning PPP funds should therefore only impact borrowers with loans in excess of $2 million.
The SBA Focus Group of the COVID-19 Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the PPP loan program is implemented.
Author Matthew M. McDonald is a partner in the Corporate & Securities Department at Klehr Harrison.