Most visitors to our site are familiar with the Paycheck Protection Program (PPP).  It has attracted massive interest from business owners and non-profits across the country.  The loan program was established with the passing of the CARES Act on March 27, 2020.  The Program went live April 3rd with a directive to qualified lenders to deliver funding as quickly as possible.  The CARES Act allocated $349 billion to the program and the funds were gone in a few days.  A bipartisan bill  replenished the program with an additional $320 billion in late April.

The Act relaxed underwriting rules, excluded collateral and credit worthiness from the borrower requirements, and included other provisions to attempt to facilitate and expedite the process of getting the cash to borrowers.  However, borrowers are/were required to make certain attestations and one of those attestations, per the CARES Act, is “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

Recently, Treasury Secretary Mnuchin indicated that PPP loans for amounts over $2 million would be subject to SBA review for compliance with the program (which currently is still unavailable), including the attestation certifying the need for the loan.  This announcement caused concern for many PPP borrowers that they may not be in compliance with the economic uncertainty/ loan necessity attestation. 

The SBA added an FAQ today (#46) that extends a safe harbor for PPP loan borrowers with principal loan balances less than $2 million.  You can read the FAQ HERE.

The original guidance is ambiguous and was likely intended to cover a broad group of businesses.  Government mandates with uncertain and/or indefinite end dates cause economic uncertainty that could justify the necessity of the loan request in most American small businesses.  The SBA determined that borrowers with loans below $2 million would be less likely to have access to adequate liquidity than borrowers who obtained larger loans.

The last day to return the PPP funds to the SBA for borrowers who did have access to other capital is tomorrow, May 14th, 2020.

We are happy to discuss any questions or comments you may have.  Our team is working and available to review with you.  Please contact our office at 610-544-5900 or .

We are in this together,

Brinker Simpson & Company, LLC

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, & cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).