Skip Navigation or Skip to Content

New Safe Harbor Rule and Paycheck Protection Program (PPP) Certification

On April 23, 2020, the SBA (Small Business Administration) issued FAQ 31, which was 20 days after the agency received the earliest applications for PPP loans. FAQ 31 discussed the requirements regarding the applicant’s loan request certification. Also on this date, the SBA created a Safe Harbor rule that included a deadline to return the PPP loans. On May 13, 2020, the SBA issued FAQ 46 that provided extra guidance relating to the certification of need, which is required for businesses to obtain a PPP loan. The agency later extended the deadline to return the PPP loan date to May 14, 2020, and then again to May 18, 2020. The SBA deems any borrower returning PPP loans by this deadline to have, in good faith, certified they needed the loan.

Additional Guidance

The additional SBA guidance relates to how the agency will review a borrower’s required certification concerning its need for a PPP loan. Essentially, it creates a new Safe Harbor that relates to certification of need for those receiving loans under $2 million. The agency will automatically deem these borrowers to have made the required certification in good faith. This is because companies under this threshold are currently less likely to have access to sufficient liquidity.

Further Relief/Repayment Option for Loans Over $2 Million

Companies that have loans over $2 million will have their circumstances evaluated by the SBA. The agency will assess the minimal guidance of the FAQ 31 document. This guidance means borrowers should be aware of their access to other liquidity sources and current business activities. As a result, several questions remain open regarding how significant capital sources are, such as cash on hand.

There has not been any focused guidance provided by the SBA for loans worth more than $2 million. However, should the SBA determine an adequate basis is lacking for the business to make its certification of need, it will require the business to repay the outstanding loan balance, and tell the lender the borrower is not eligible for loan forgiveness.

However, if borrowers repay their loans after the SBA has determined they did not need them, there will be no action against them. FAQ 46 did not confirm a time when borrowers must pay back the loans if the SBA determined adequate need does not exist. Also, there was no reference made to any required interest rate.

How is the Safe Harbor Calculation Made?

The SBA will determine the loan amount for the new Safe Harbor by combining the amount of the applicant’s PPP loan with PPP loans received by the applicant’s affiliates. This means that businesses that applied with an affiliation waiver now need to bear affiliation in mind. the new Safe Harbor rule applies to the business and its affiliates’ certification of need for the PPP loan funds. Should the collective amount of the applicant’s loan and affiliates’ loan be under $2 million, a loan will cover it. This will eliminate any potential enforcement action relating to the specific certification. However, it will not resolve any issues with other certifications made to obtain a loan.

For more information about this article, please contact our tax professionals at or toll free at 844.4WINDES (844.494.6337).
Payments OnlineTaxCaddy
Secure File TransferWindes Portal