On May 5, the US Small Business Administration (SBA) and Department of the Treasury announced a one-week extension of the safe harbor deadline for Paycheck Protection Program (PPP) loans, from May 7, 2020, to May 14, 2020.
The borrowers in question don’t have to apply to receive the extension. The SBA will issue further guidance before next week’s deadline.
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.
The PPP loans were created under the CARES Act and were intended to help small- to mid-sized businesses weather the impact of the pandemic. These loans are forgivable if used for payroll and rent and meet certain other criteria.
Since Question 31 was released on April 23, there has been significant uncertainty for borrowers as to how the good faith certification stating “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” should be interpreted. This has made it very difficult for borrowers to understand how this may impact their loan and whether they should be returning the money. This extension provides time for the SBA to provide clear guidance and for borrowers to make informed decisions.
We will update you when additional guidance becomes available.