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Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Managing Director of Audit and Accountingview bio

The Fed Issues Safe Harbor for Loans Under $2 Million


The United States Department of the Treasury (Treasury) and the Small Business Administration (SBA) both continue to issue information and guidance regarding the Paycheck Protection Program (PPP) loans by updating their FAQ section. (See the complete  FAQ document posted yesterday.)

In their most recent update on May 13th, the SBA addressed the good-faith certification issue. Specifically, they addressed Question 46 which asks: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

The updated guidance from the Treasury provides several positive clarifications for borrowers under the PPP loan program:

  • There will be a “safe harbor” for PPP loans under $2 million.  As stated by the SBA’s updated FAQ,“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,” said the last page of an updated guidance document posted on the department’s website.
  • Borrowers with PPP loans greater than $2,000,000 will remain subject to potential review by the SBA on the Loan Necessity Certification. 

Previous direction advised each borrower to closely evaluate their prior Loan Necessity Certification to ensure such certification was made in good faith and that the current economic uncertainty made their loan request necessary to support ongoing operations.

Further, it was suggested that if a borrower does not feel good about their initial Loan Necessity Certification, the SBA would permit the borrower to return the PPP loan proceeds on or before May 14, 2020. 

The SBA just extended this safe harbor date to May 18, 2020.

While the updated guidance from the SBA and Treasury provides a safe harbor to borrowers with PPP loans of less than $2 million with respect to the Loan Necessity Certification, all borrowers are still potentially subject to the SBA’s review of other aspects of their PPP loans such as the maximum loan amount, eligible employees and use of the loan proceeds.  

Earlier today, RINA completed the responses to the questions sent during or immediately after the May 6th webinar, "Forgive, But Do Not Forget! Maximize the Benefit of Your PPP Loan."

These FAQ are posted on RINA's website, and a recording of the webinar itself is published in the COVID-19 video library.

Catch the Next RINA Webinar!

  • We have scheduled an "Update to Maximizing the Benefit of Your PPP Loan" webinar.
  • That event will be next Wednesday, May 20 at 1:30 PDT.
  • An invitation will be emailed and posted on our website shortly.

If you have any questions or concerns, please reach out to your RINA accountant, or email our response team to discuss the help you need

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