Many small businesses have reached out to us recently with concerns about how they can prove that their Paycheck Protection Program loan request was necessary to support ongoing operations. Thankfully, the Small Business Administration (SBA) along with the Department of Treasury released guidance yesterday, May 13^th, regarding a safe harbor threshold for loan recipients with a principal loan amount of less than $2 million.

Question #46 posted on the Paycheck Protection Program FAQ’s states that when submitting a PPP application, all borrowers must certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The FAQ states that any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

The SBA determined the safe harbor was appropriate for these borrowers as loans below the $2 million threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.

There are still many open questions surrounding the Paycheck Protection Program, however this latest guidance should provide some comfort for those under the safe harbor amount. Continue to reach out to our team and check our COVID resources webpage for additional guidance on this program.