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PPP Eligibility and new Safe Harbor Rules

On April 23, 2020, the U.S. Small Business Administration (“SBA”), in consultation with the Department of the Treasury, issued additional guidance for borrowers and lenders, in the form of Frequently Asked Questions (“FAQs”), concerning the implementation of the Paycheck Protection Program (“PPP”), established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”).

In particular, FAQ #31, which may impact your organization, articulates a standard that will likely be applied retroactively to all borrowers that applied for and received PPP loans. Specifically, the FAQ states in pertinent part that “all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application.”


Further, it mandates that “all borrowers should review carefully the required certification that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant’” by taking “into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operation in a manner that is not significantly detrimental to their business.” If a borrower fails to satisfy the requirements of the certification, pursuant to the updated guidance, the borrower “will be deemed by SBA to have made the required certification in good faith” if they repay the loan in full by May 7, 2020.

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