New Guidance for the Paycheck Protection Program Loans
On May 13, 2020, the Treasury Department (Treasury) and the Small Business Administration (SBA) released new guidance addressing the good-faith certification by an applicant for a Paycheck Protection Program loan that, due to the current economic uncertainty, is necessary to support the ongoing operations of the applicant (the “need certification”). This new guidance states that businesses seeking a PPP loan of less than $2 million will be deemed to have made their request in good faith.
The Treasury and SBA have determined that borrowers who are requesting loans of less than $2 million are likely to lack the access to capital markets and other sources of funds that borrowers seeking larger loans are able to tap. Thus, they provide a safe harbor with respect to the need certification for those otherwise qualified borrowers who are borrowing less than $2 million. The Treasury and the SBA will focus their auditing and compliance program on borrowers who have obtained loans over $2 million.
Today’s guidance again modifies the safe harbor deadline (previously May 14, 2020) and extended the deadline to return loan funds to May 18 for borrowers who determine they cannot make the initial need certification in good faith. If, after careful review of the law and all guidance documents, a borrower believes that any of their certifications were inaccurate, they should still return the funds.
In addition, the new guidance states that if a borrower made a good faith need certification and the SBA determines that the borrower’s loan exceeding $2 million did not meet the standard established by the need certification, the loan will have to be repaid, but the SBA will not refer the borrower for any adverse administrative action so long as the loan is repaid after being notified by the SBA.
Finally, the newest guidance does not modify any other eligibility requirements, nor does it grant relief to entities that are not eligible because of size or other considerations. This new guidance merely addresses the uncertainty surrounding the “need certification” analysis. Kaufman and Canoles will provide additional updates as the Treasury and SBA release further guidance.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2026.
