The SBA, in consultation with the Department of the Treasury, has announced a decision that businesses who have received PPP loans with an original principal amount of less than $2 million are deemed to have made the required certification concerning the necessity of the loan request in good faith.
The good faith certification, stated when submitting a PPP application, states that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
This means that audits will not be conducted to verify that the funds were needed in order to continue doing business. However, investigation regarding the allocation of at least 75% of funds for wages, may still take place.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.
As always we are here to assist you when the need arises.
~With care and concern,
from all of us at Colman Knight