On the evening of May 5, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, extended the date from May 7 to May 14, 2020 for borrowers to return PPP loans without penalty. This refers to loans for which borrowers may not have an economic need under the new guidance.
The guidance under FAQ 43 states:
Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?
Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
As stated yesterday, penalties are significant and could include criminal fines of up to $1 million and up to 30 years imprisonment. The SBA has stated that, if a business has taken a loan that the business did not “need,” the business may return the loan by May 14, 2020 and face no criminal consequences.
If you have concerns about the loan application certifications and your eligibility to receive a PPP loan, you may want to involve an attorney who can help you evaluate your options and the corresponding legal implications.
The Treasury and the SBA continue to update, change and clarify the guidance related to the PPP Loan Program. Your ORBA advisor is available to assist you through this complex process. If you have questions regarding this Client Alert or if we can be of assistance in helping you through the application or forgiveness process, please contact Frank Washelesky at [email protected] or your ORBA advisor.