The U.S. Small Business Administration (SBA) has extended the safe harbor period for returning Paycheck Protection Program (PPP) funds until May 14, 2020. The new guidance stated that the extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.
When applying for PPP loans, borrowers were required to certify in good faith that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The SBA subsequently issued FAQ #31 which further clarified this certification and added “taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
Some companies have decided to return their PPP loans after deciding they possessed sufficient cash to manage their businesses during the pandemic. Others fear they will not qualify for loan forgiveness due to their businesses being closed because of stay at home orders, or a reduction in their workforce.
If you are facing uncertainty about whether to return your PPP funds after considering this new liquidity requirement, we highly recommend reading this recent blog post by the AICPA, which reminds small businesses about the intent of the PPP. We feel the vast majority of small businesses were legitimately eligible to receive the funding and have nothing to worry about.
If you have already received PPP funds and have changed your mind about keeping the loan, you should talk with your lender. You have until May 14, 2020 to repay the loan without repercussions.
For more information and assistance on this or other issues related to emergency aid, feel free to reach out to McClintock & Associates, or visit our COVID-19 updates page.
