woman on paper boat in water symbolizing PPP safe harbor

The United States Treasury has just released additional information regarding the Paycheck Protection Program (PPP) and safe harbor for unqualified loan recipients.

The Small Business Administration (SBA) issued a safe harbor to PPP recipients with a principal loan amount under $2 million. The SBA considers these borrowers as automatically demonstrating good faith of their need, as they’re generally less likely to have the liquidity needed to sustain them during an emergency.

As stated last week, the SBA will audit all PPP loans over $2 million to make sure the recipients demonstrate good faith regarding their need for funding. Some of these borrowers will indeed wind up qualifying for their loans. However, if the SBA determines that the need is not established:

  • The SBA will require repayment of the outstanding loan balance.
  • The borrower will not be eligible for loan forgiveness.
  • If the borrower repays the loan, no further enforcement will take place.
  • There is no universal deadline for this loan repayment. The SBA will determine due dates on a case-by-case basis as audits take place.

The SBA has given companies until May 18 to return unqualified PPP funds without penalty. In light of the current guidance, we suggest adhering to the May 18 deadline if you are certain that you won’t qualify for your PPP loan.

If you have questions regarding this safe harbor or any other PPP concerns, contact James Moore’s CPAs as soon as possible. We’re happy to help you navigate this ever-changing program.

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