ATTENTION: PPP UPDATE RELEASED THIS MORNING – Good news for those with PPP loans less than $2 million

We are writing to inform you of an important update to our article shared yesterday, May 12, 2020, regarding the Paycheck Protection Program, and specifically, the certification made by borrowers as to the necessity of the funds in the loan application. The Department of Treasury and SBA have just released additional guidance this morning, May 13, 2020, stating that 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 has made such a determination with the reasoning that borrowers with loans below this threshold are less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers who obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.

For those borrowers with loans greater than $2 million, the SBA has also confirmed that if these borrowers fail to demonstrate an adequate basis for making the required good-faith certification, the 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, the SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.

James K. Cowan, Jr. at jcowan@cowanperry.com / 540.443.2860

Suzanne Y. Pierce at spierce@cowanperry.com / 540.400.8127