(UPDATED) NEW GUIDANCE ON PAYCHECK PROTECTION PROGRAM LOANS ISSUED
The federal government has issued guidance providing increased certainty and clarity for small businesses that have received a loan through the new Paycheck Protection Program (PPP).
As part of applying for a PPP loan, employers have been asked to certify in good faith that they need the loan to support the ongoing operations of their business due to “current economic uncertainty.” Employers uncertain about this good-faith certification have had until May 14* to return funds received through PPP without facing scrutiny or running afoul of program rules. Media reports have shown that some PPP recipients have already begun returning loans.
Under new guidance from U.S. Treasury Department and the U.S. Small Business Administration (SBA), any borrower who received less than $2 million from PPP will now be deemed to have requested the loan in good faith. Borrowers who received loans greater than $2 million will still be subject to review by federal agencies to ensure the loan was requested in good faith.
Treasury explained the rationale behind this decision by stating that borrowers with loans of less than $2 million are more unlikely to have had access to adequate liquidity to weather the economic disruption brought on by the pandemic than borrowers with loans of more than $2 million. The goal with this new guidance, according to Treasury, is to “promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.”
The full rule can be read here (Question 46). PPP recipients in the greater Louisville region are advised to consult with legal and/or financial professionals for any questions related to PPP or this new guidance.
*Later in the day on May 13, this date was extended to May 18 (see Question 47).