Department of Treasury and Small Business Administration issue Safe Harbor rules for PPP Loan Good Faith Certifications

by Rob Holcomb, EA, Extension Educator, Agricultural Business Management

On May 13, 2020, the United States Treasury and the Small Business Administration (SBA) issued safe harbor guidelines for recipients of Payroll Protection Program (PPP) loans.  When an applicant submits a PPP loan 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.” 

Previously, SBA and Treasury had communicated that applicants not meeting the uncertainty provisions of the loan should repay loan proceeds by May 14, 2020.  The concern for many taxpayers participating in this program is “what qualifies as uncertainty?”

The PPP loan safe harbor states: “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.” This is good news for most small businesses and most farm operations. 

A set of FAQs regarding PPP loans are posted online.  Please see FAQ #46 (page 16) at the following link.

Applicants with loan amounts in excess of the $2 million threshold are subject to examination by SBA to determine if the level of uncertainty meets minimum standards for the PPP loan program.  The threshold for “uncertainty” remains unclear for loan applications exceeding $2 million. 

The safe harbor does not automatically qualify an applicant for loan forgiveness.  To acquire loan forgiveness, loan recipients need to apply through the financial institution that issued the PPP loan.