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PPP Guidance: Safe Harbor for Good Faith Certification

May 14, 2020


The Small Business Administration (SBA) has released additional guidance attempting to clarify how it will view the good faith certification required of the Paycheck Protection Program’s (PPP) loan borrowers. The Administration previously advised borrowers that if they did not have a good faith basis for their certification of need they had until May 14 to return the money without any consequences.

Now, the SBA has provided a safe harbor. 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 a good faith certification of need. The SBA’s stated reasons for providing the safe harbor are to:

1. Promote economic certainty; and
2. Conserve its own finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

The guidance goes on to say that borrowers with loans greater than $2 million “may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” If the loan is reviewed and the SBA determines there was no good faith basis for the certification, the borrower may be required to repay the loan and will not be eligible for loan forgiveness. The guidance does not state whether the repayment will be immediate, or occur over two years at 1% interest or based on some other repayment terms. It does say that if the borrower repays the loan, “SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”

To read the full guidance released by the SBA, click here.

Please feel free to contact your Wilkins Miller advisor with any questions.