SBA Extends Safe Harbor Period - COVID-19 Legislation
On April 23 and April 28, 2020, the Small Business Association (“SBA”) updated its list of Frequently Asked Questions (“FAQ”) and gave guidance on whether businesses owned by large companies and privately owned companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan. While the FAQ did not give a blanket answer, the SBA said that it was unlikely those companies could make the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations” in good faith and that those companies should be prepared to demonstrate a basis for that certification. When considering whether a business can or did make that certification in good faith, it must take “into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.” While framed as a question regarding businesses that are owned by large companies, this interpretation is likely to apply to any business.
The SBA created a safe harbor for businesses that received a PPP loan that was not necessary to support ongoing operations. A borrower that applied for a PPP loan prior to April 23, 2020, and repaid the loan in full by May 7, 2020, would be considered to have made the certification in good faith.
On May 5, 2020, the SBA extended the repayment date for the safe harbor to May 14, 2020 and stated that it intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
Further, SBA guidance issued on April 29, 2020 stated the SBA will automatically review all PPP loans in excess of $2 million when a lender submits a business’s application for forgiveness. Additionally, the SBA has reserved the right to audit other PPP loans as appropriate.
If you have any questions related to this legislation, please contact your attorney at Pedersen & Houpt or the attorneys below and we will answer your questions and walk you through the program.
Larry Byrne
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2155
lbyrne@pedersenhoupt.com
Eric J. Kordish
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2249
ekordish@pedersenhoupt.com
Matthew J. Schmidt
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2281
mschmidt@pedersenhoupt.com
David A. Martin
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2286
dmartin@pedersenhoupt.com