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SBA and Treasury Department Provide Additional Guidance on Safe Harbor Certification

As the May 14th safe harbor deadline looms, the SBA, in consultation with the Department of the Treasury, issued an update to the Paycheck Protection Program FAQs, providing clarity on how the SBA will review borrowers’ required good-faith certificate concerning the necessity of their loan request.

The answer to FAQ 46 begins, “When submitting a PPP application, all borrowers must certify in good faith that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’” It then goes on to state that “any 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 determined the safe harbor appropriate for the following reasoning:

  • Borrowers with loans below $2 million threshold are less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans
  • The safe harbor will promote economic certainty as PPP borrowers with more limited resources attempt to retain and rehire employees
  • Due to the large volume of PPP loans, the safe harbor will enable the SBA to conserve its audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns

As for borrowers with loans greater than $2 million, FAQ 46 stresses that those “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.”

Also, loans in excess of $2 million will be subject to SBA review for compliance with requirements described in the PPP Interim Final Rules and in the Borrower Application Form. The SBA will seek repayment of any PPP loan balance if it determines that a borrower “lacked an adequate basis for the required certification concerning the necessity of the loan request.” The SBA will also inform the lender that the borrower is not eligible for loan forgiveness.

Price Kong can help you navigate the complexities of the PPP. Contact us at 602.776.6300 or visit for more information.