Companies who received funds under the Paycheck Protection Program are being asked by the Treasury and SBA to review their certification that "current economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant." Borrowers have until May 14, 2020 to return funds if they believe that their certification was not made in "good faith."

On May 13, 2020 the SBA and Treasury updated their FAQs to explain the review process for this certification. The SBA has determined that the following safe harbor will apply to any loans of less than $2 million: "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." This provides some level of reassurance for borrowers who received funds of less than $2 million.

Companies with loans over $2 million that do not satisfy the safe harbor "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." The SBA has previously stated that all PPP loans in excess of $2 million will be subject to review for compliance with program requirements, In the event that the SBA determines that the loan is not eligible for forgiveness, they will inform the lender. If the borrower pays back the loan the "SBA will not pursue administrative enforcement or referrals to other agencies." Additionally, for the lenders the determination "will not affect SBA's loan guarantee."

This new guidance provides some level of assurance to many who received PPP loans, specifically smaller companies. Larger companies may have some uncertainty and should closely review their certification by the May 14, 2020 deadline to return funds if needed.

Read more about this and all FAQs that the Treasury has addressed surrounding the Paycheck Protection Program.