The Small Business Administration (SBA) extended the repayment deadline for Payroll Protection Program (PPP) for businesses that initially took a PPP loan, but did not meet the self-certification requirements at the time that they applied for the loan. The deadline is now automatically extended from May 7, 2020, to May 14, 2020.
Companies that were not eligible to take the loan, because they were large companies with other forms of liquidity that they could draw upon, may return the funds by May 14, 2020 with “no questions asked.”
The U.S. Treasury and the SBA issued frequently asked questions (FAQs) on PPP loans. One question asks whether businesses owned by large companies with adequate sources of liquidity to support their ongoing operations qualify for PPP loans. According to the SBA FAQ, all borrowers must evaluate their economic need for a loan under the standards in effect at the time of the loan application. The standards are set by the Coronavirus Aid, Relief and Economic Security (CARES) Act, which established the PPP, as well as subsequent regulations. Borrowers must certify that their PPP loan request is necessary due to “current economic uncertainty” that made the loan necessary to support ongoing operations. The certification must be made in good faith, taking into account the borrower’s current business activity and ability to access other sources of liquidity in a way that’s not “significantly detrimental” to the business.
Treasury Secretary Steven Mnuchin has stated that PPP loans of $2M or more will be scheduled for audit. The loan application notes that making a false statement to obtain a guaranteed loan from the SBA is punishable by imprisonment of up to five years and/or a fine of up to $250,000. The federal False Claims Act (FCA) permits treble damages, or triple the amount of the government’s actual damages, as well as civil penalties, imprisonment up to five years and a fine up to $250,000 for criminal liability. Further guidance is expected from the SBA and Treasury within the coming days. Please contact Kristina Curry at firstname.lastname@example.org, or one of our attorneys who are prepared to assist you if you have questions regarding your PPP loan, loan forgiveness, or whether you should consider any responses to the repayment deadline date on May 14, 2020.