SBA Further Extends “Safe Harbor” Date to May 18 for Returning PPP Loan Funds

May 14, 2020

Mike Batts, CPA


The Small Business Administration (SBA) announced late yesterday that it is further extending to May 18 a “safe harbor” date for returning Paycheck Protection Program (PPP) loan funds.  The SBA had previously extended the safe harbor date from May 7 to May 14.  The extension was announced in the form of an additional FAQ (#47).

Background and Context

In our Alert dated April 29, we noted that the SBA and the Treasury Department had announced intentions to scrutinize PPP loans for eligibility.  Amidst public criticism of borrowings by certain large and high-profile companies, the SBA and Treasury announced a focus on the good-faith certification PPP borrowers were required to make in the application process that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  As we stated in our April 29 Alert, the SBA and Treasury previously announced intentions to perform a “full review” of every PPP loan in excess of $2 million in addition to other loans “as appropriate” to address whether borrowers appropriately made the required certification.  In previous public statements, the SBA and Treasury Department alluded to the possibility of penalties and even criminal prosecution for PPP borrowers for whom it is determined that their good-faith certifications were not valid.  The SBA and Treasury originally stated that borrowers who determine that they were not eligible for a PPP loan may repay the funds by May 7, 2020 and not be penalized.  The SBA subsequently extended that safe harbor date to May 14, promising additional guidance on the review process before May 14.  As noted above, new FAQ #47 further extends the safe harbor date to May 18.

Earlier yesterday, the SBA issued FAQ #46, providing 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.” (See our Alert related to FAQ #46 here.)

The new guidance in FAQ #46 allayed concerns about the good-faith certification review process for borrowers with loans under $2 million.

For borrowers with loans in excess of $2 million, FAQ #46 provided some relief for concerns about penalties and the possibility of criminal prosecution by effectively providing that if a borrower’s good-faith certification is found not to have been valid, the repercussion is that the borrower will be required to repay the funds (i.e., it will not qualify for forgiveness).  The guidance indicates that no penalties will apply and seems to indicate that no criminal prosecution referrals will be made.

Neither FAQ #46 nor FAQ #47 provide information to borrowers with loans in excess of $2 million about two critically important topics:

  • What standards will the SBA use to determine whether a borrower’s good-faith certification was valid?
  • What will the review process entail? (That is, what types of information, records, and documents will the SBA require borrowers to produce and what will be the process for doing so?)


The lack of information about the two topics listed above continues to create a conundrum for borrowers with loans in excess of $2 million.  Not knowing what standards will be used to evaluate their loan eligibility and not knowing what the review process will entail will cause many borrowers to be hesitant in their use of the PPP funds…due to uncertainty as to whether they will be required to repay the funds.

We hope that the further extension of the safe harbor date to May 18 portends the possibility of additional guidance before that date on the SBA’s intended review process and the standards they will apply in the reviews.

We still await guidance on the many unanswered questions surrounding the loan forgiveness process, and we remain hopeful that it will be issued soon.

We note that the FAQ originally setting the safe harbor date at May 7 (which is now extended to May 18) applies to borrowers who applied for a PPP loan prior to April 24, 2020.  It is not clear whether a similar opportunity will exist for borrowers who applied after April 23.

Full text of FAQ #47

47. Question:  An SBA interim final rule posted on May 8, 2020 provided that any borrower who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification concerning the necessity of the loan request in good faith.  Is it possible for a borrower to obtain an extension of the May 14, 2020 repayment date?

Answer:  Yes, SBA is extending the repayment date for this safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ #46.  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.



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