The Small Business Administration (SBA) has extended the timeline for companies to pay back funds for loans they received from the Paycheck Protection Program (PPP) to May 14th (from the original May 7th deadline).
The PPP loan program can be complex and confusing, and as the SBA continues to provide information, many businesses are wondering if they should return the loans. Those businesses who wish to return the funds have until May 14th to do so.
The SBA has indicated that if the money is returned by May 14th, the company will be deemed to make the required certification (detailed below) in good faith.
Does your business qualify for the PPP Loan?
The Frequently Asked Questions (FAQ) document released by the SBA provides the following guidance:
- In addition to reviewing applicable affiliation rules to determine eligibility, 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. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, 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.
- For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith.
- Although the original guidance appeared to be specific to Public Companies, the SBA later provided clarification that this guidance applies to ALL companies.
SBA intends to provide additional information and clarifications surrounding this issue prior to the new May 14th deadline. SVA suggests you talk with your CPA to discuss how the rules may apply to your business.