In response to a recent announcement that the Small Business Administration would review any Paycheck Protection Program loans allocated in amounts exceeding $2 million, on May 13, 2020 the agency issued additional FAQ answers, by releasing questions 46 and 47. In the FAQs, the SBA noted that it will extend an automatic safe harbor to borrowers that have received PPP loans with an original principal amount of less than $2 million.

Specifically, this is responsive to question 46, asking how the SBA will review borrowers’ required good-faith certification concerning the necessity of their loan request. In order to submit a PPP application, borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The SBA implemented the following 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 the required certification concerning the necessity of the loan request in good faith.”

The SBA reasoned that the safe harbor was necessary because borrowers with loans below the $2 million threshold are generally less likely to have had access to adequate sources of liquidity in the COVID-19 economic environment than borrowers that obtained larger loans. The SBA concluded that the safe harbor will promote economic certainty by allowing PPP borrowers with limited resources to retain and rehire employees.

However, borrowers with loans greater than $2 million are not eligible for the safe harbor, and these borrowers will be subject to review by the SBA for compliance with program requirements. Here’s how the SBA will handle noncompliance with program requirements:

“SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning the necessity of the loan request.”

Previously, the SBA stated that any borrower who applied for a PPP loan and repaid the loan in full by May 14, 2020, would be deemed by the SBA to have made the required certification in good faith. Due to the new FAQs, the SBA has extended the repayment date for the safe harbor to May 18, 2020. Borrowers do not need to apply for this extension.

We are closely monitoring all CARES Act provisions and will continue to keep you updated. If you have questions about the CARES Act, one of our attorneys can assist you. Please do not hesitate to contact the Wladis Law Firm. We will do our best to provide you with updates and will be available to answer questions as circumstances change. We may be reached at (315) 445-1700 or by e-mailing Attorney Jennifer Huse Granzow at or by reaching out to your everyday firm contacts.