COVID-19 UPDATE: SBA Issues New FAQ #47 Extending Repayment Deadline for PPP LoansMay 15, 2020
The SBA issued FAQ #47 last night extending the so-called “safe harbor” repayment period from May 14, 2020, to May 18, 2020. The “safe harbor” repayment period, which was established in an interim final rule issued by the SBA on May 8, 2020, provided that any borrower who applied for a PPP loan and repays that loan by May 14, 2020, will be deemed by the SBA to have made in good faith the required certifications concerning the necessity of the loan. FAQ #47 extends that safe harbor payment date to May 18, 2020, and provides that there is no need to apply for the extension – it is automatic. The reason for the extension is so that borrowers have an opportunity to review and consider FAQ #46, issued on May 13, 2020, which explained that the anticipated recourse against borrowers with loans over $2 million will be loan repayment, rather than criminal prosecution (except in the case of falsifying information or knowing they were ineligible). FAQ #46 also functionally created a safe harbor for borrowers with loans of less than $2 million with regard to the “necessity” requirement.
The newly-issued interim final rule authorizes all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation in accordance with the interim final rule posted on April 14, 2020, or to permit the seasonal employer to calculate its maximum loan amount using the alternative criterion posted on April 28, 2020. SBA has recognized that some partnerships and seasonal employers applied for PPP loans prior to the issuance of these guidelines by the SBA and the Department of Treasury, and is allowing those borrowers to receive the maximum amount allowed under the guidelines. So, if you are a partnership who received your loan before April 14, 2020, or a seasonal employer who received your loan before April 28, 2020, then you may be eligible for additional PPP funds. You will need to submit additional documentation to support the increased loan amount. The interim rule refers partnerships to the April 24, 2020 guidance entitled “How to Calculate Maximum Loan Amounts, Question 4″ to determine the amount of your increased loan amount. The increase will be provided to the borrower as an additional disbursement. However, in no event can the maximum loan amount (original loan + additional amount) exceed $10 million for an individual borrower or $20 million for a corporate group. There was no additional guidance in the rule about whether the disbursement would alter the forgiveness parameters for either the entire loan or forgiveness of the supplemental disbursement individually.
One caveat, you are not eligible for the increased loan if your PPP lender has submitted Form 1502 to the SBA. The deadline for the submission of these forms depends on your loan application date, so it is imperative that you contact your PPP lender immediately.