SBA Guidance on PPP Loan Evaluation and Safe Harbors

Wed May 13, 2020

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Today, the Small Business Administration issued new guidance related to the recent announcement that the SBA will review certain Paycheck Protection Program loans to evaluate the applicant’s economic need for the loan. Under the new guidance, businesses receiving PPP loans of less than $2 million will be eligible for a safe harbor that deems their loan request to have been made in good faith; as such, loans below $2 million will not be subject to further review. Borrowers with loans greater than $2 million “may still have an adequate basis” for applying for a PPP loan based on their individual circumstances, but they will be subject to SBA review to determine the necessity of the loan request. If the review determines that the applicant should not have received PPP funds, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. For more information, you can review Question 46 in the SBA’s updated PPP FAQ document.