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Posted by Kevin Higgins on Thu, May 14, 2020 @ 08:12 PM


One day before the deadline to return Paycheck Protection Program Funds, the Small Business Administration (SBA) updated its loan program’s frequently asked questions to create a safe harbor for recipients of loans of $2 million or less. The last minute safe harbor addition provides relief, but it also raised some additional questions, particularly coming so close to a major deadline.

The Context

The Paycheck Protection Program (PPP) had been designed to provide additional liquidity to organizations with 500 or fewer employees that were heavily affected by the COVID-19 pandemic. Some of the early recipients of the highly competitive program’s forgivable loans were not exactly the small organizations the program had been intended to help, and in light of these discoveries, several recipients, including Shake Shack and the Los Angeles Lakers, agreed to return their PPP funds. Other organizations that received the funds but may not exactly meet all of the requirements for the PPP support were initially asked to return their funds by May 7, a date that was subsequently adjusted to Monday, May 18

The Pushback

Many organizations had expressed concern about the PPP return, particularly if the funds had already been partially used, as this would require the organization to hand over capital likely in short supply coming out of the height of the pandemic’s disruption. The decision over whether the organization should return funds also comes down to one of the more difficult to answer questions in the PPP application: the self-attestation on that a PPP loan would be a necessity to support the applicant’s ongoing operations given the economic uncertainty.

The SBA has vowed to review the certification statements of all loans of greater than $2 million and spot check the others. This review raised ire because if the SBA’s conclusion on necessity differs from the recipient’s, the recipient could face fines, penalties, and other corrective action. 

The Response: Safe Harbor for Small Loan Recipients and Lessening of Enforcement Actions

In response to some of the pushback, the SBA added question 46 to its FAQ document. Question 46 creates a safe harbor for recipients of loans of less than $2 million. It clarified that applicants receiving “an original principal amount of less than $2 million will have been deemed to have made the required certification concerning the necessity of the loan request in good faith.” In other words, the SBA and the Treasury will not be scrutinizing the small loan recipients, so the loan recipients will not have to scramble to return funds. The SBA then added question 47 to extend the repayment date to May 18.

Question 46 also indicates the SBA will go a little easier on organizations that the SBA determines upon further review do not meet the necessity certification. If the SBA’s conclusion differs from the loan recipient’s, and the loan recipient repays the loan, the SBA will not pursue enforcement actions. The SBA states that its conclusion will not affect the SBA loan’s guarantee, which provides some relief for PPP lenders.

What the Latest SBA Guidance Means for PPP Recipients

Organizations with greater than $2 million loans will want to review the other guidance the SBA has provided about qualifications for the loan and — quickly — work with their lender to evaluate whether a return of the loan will be necessary. The potential influx of recipients trying to work with their SBA lenders to return program funds may make the return of funds more difficult.

For immediate questions about the return of funds, contact your SBA lender. Our team will continue to provide updates as new details on the PPP and other SBA loan programs emerge. For more information on PPP loans, please contact us.

Looking for more COVID-19 resources? Visit our resource center for expertise on impacts to expect and how your business can respond.


Kevin-Higgins-Print ColorKevin is a Managing Director of the Accounting and Auditing* Group at CBIZ & MHM New England. He can be reached at or 401.626.3218.



Copyright © 2020 CBIZ & MHM (Mayer Hoffman McCann P.C.). All rights reserved. CBIZ and MHM are separate and independent legal entities that work together to serve clients. CBIZ is a leading provider of tax and consulting services. MHM is an independent CPA firm providing audit and other attest services. This article is protected by U.S. and international copyright laws and treaties. Use of the material contained herein without the express written consent of the firms is prohibited by law. Material contained in this alert is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their business.

Tags: COVID19, Coronavirus, CARES Act, Coronavirus Aid, Relief, and Economic Security Act, PPP, PPP Loan, payment protection plan, SBA, Small Business Administration

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