Two days before the May 7 due date to return PPP loan funds to gain the presumption that the borrower had made a good faith representation that the loan was necessary, the SBA has granted a one week extension on that deadline in an update to the Payroll Protection Program loan FAQ.[1]

When the SBA published Question 31 that emphasized that borrowers who had sufficient liquidity likely could not have correctly represented the loan was necessary for the business, the agency gave borrowers who had already obtained a loan until May 7 to repay the loan.  While the relief says in that case it will be presumed the borrower made a good faith certification, in reality what it does is allow the borrower to avoid the risk of being asked to demonstrate the necessity of the loan and any potential sanctions that might arise if it is found that the certification was not made in good faith.

In Question 43 the SBA has now granted a one-week extension to make a safe harbor repayment:

43. 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.

[1] “Paycheck Protection Program Loans Frequently Asked Questions,” Small Business Administration website, May 5, 2020 version, May 5, 2020, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf (retrieved May 5, 2020)