PPP Return Deadline Extended to May 14th

The Treasury Department has extended to May 14 th the safe harbor deadline by which businesses and nonprofit organizations who received Paycheck Protection Program (“PPP”) funds must return the funds in order to avoid potential penalties as a result of the revised PPP eligibility standards in FAQ #31.

The Treasury announced the extension last night in a new FAQ added to its PPP loan program FAQ guidance. The new FAQ indicates that the Treasury intends to issue additional guidance over the coming week on the new certifications required by FAQ #31.

In FAQ #31 the Treasury announced that PPP loan applicants must evaluate their eligibility for PPP funds not simply based on the originally announced standard of whether or not “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” but by also taking into account the applicant’s current business activity and its ability to access other sources of liquidity sufficient to support its ongoing operations in a manner that is not significantly detrimental to the business. The new FAQ #31 standard, which was published on April 23 and applies retroactively to PPP loans awarded prior to that date, has been a source of confusion among PPP recipients who are facing current and projected business losses as a result of COVID but who may have access to lines of credit or endowments to help fund their losses.

The text of the Treasury’s announcement is as follows:

“43. Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date? Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.”