Article

SBA extends deadline to return PPP loans to May 14

May 6, 2020 · Authored by Paul Dillon, Michelle Hobbs, Pat Balthazor

The Small Business Administration (SBA) extended the deadline for borrowers under the Paycheck Protection Program (PPP) to return their loans to May 14, 2020, from May 7, 2020. This extension was provided via a May 5 update to the Paycheck Protection Program Loans Frequently Asked Questions.

Included in the PPP, enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is a provision that requires borrowers make a good faith certification that their loan is necessary to support their ongoing operations in the wake of the “uncertainty of current economic conditions.” The statutory language would appear to have broad application given the current economic climate; however, the matter of larger businesses with considerable market value receiving PPP loans has become a topic of controversy in recent weeks.

Eligibility is complicated because the CARES Act offers few guidelines for the loan program. It simply states a taxpayer must self-certify that current economic uncertainty makes the loan request necessary to support the ongoing operation of the business. No timeline has been provided related to the requirement for support of the ongoing operation of the business, leading to additional uncertainty. Does a business need to look at its capital requirements for a short time frame, such as a few months, or a longer time frame? The requirement for support is also not defined. Must a business prove it has suffered an economic downturn at the time of the loan? The Treasury Department has since suggested this concept of necessity blocks many public companies from applying because they can theoretically raise money in other ways, such as by selling new shares on a stock exchange. However, for many loan applicants that are not public companies, self-certifying that the loan request is necessary creates uncertainty for them since the requirements are not clearly defined.

Additionally, some lawmakers asserted that borrowers deemed to have received PPP loans without a critical need for them could be liable for penalties for making a false certification in response to the aforementioned requirement. In fact, FAQ No. 31 originally allowed recipients who took out their loans prior to April 24 and returned them by May 7 to have made their certification in good faith, and not be liable for penalties. This safe harbor was subsequently published in an interim final rule on April 28.

The guidance also notes that Treasury will review all loans in excess of $2 million “in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.” Finally, the FAQ explains more guidance is forthcoming on how the SBA will review borrowers’ certifications.