PPP Loans Under $ 2 Million Get Large SBA Waiver
If your business received a loan of less than $ 2 million under the Paycheck Protection Program, the new message from the Small Business Administration is that you are fine.
In addition to its long list of FAQs, the SBA said on Wednesday that all loans made below that dollar threshold will be considered to have met the necessary “good faith” standard under the PPP.
The clarification comes after Treasury Secretary Steve Mnuchin said in April that the SBA would review P3 recipients who received more than $ 2 million to make sure they needed the funds given their large size. . In particular, the public enterprises which received the funds were ordered to return them. The only known public transport company to have received one, Evo Transportation & Energy Services, did not say Thursday whether it would return its $ 10 million. (He had disclosed receipt of the loan in an 8-K filing with the Securities & Exchange Commission at the end of April. No subsequent 8-K filing announcing the return of funds has been filed).
“Any borrower who, together with its affiliates, has received PPP loans with an initial amount of less than $ 2 million will be deemed to have made the required certification regarding the need for the loan application in good faith,” SBA said. in its update. FAQ.
Statistics released by the SBA for the second round of the PPP, which began on April 27, showed that just over 19% of loans exceeded the $ 2 million threshold, meaning that more than 80% n do not have to worry about certification.
Law firm Scopelitis Garvin Light Hanson Feary sent a notice on the change, outlining concerns some small P3 borrowers were facing. “Many PPP borrowers have struggled with the new ASB mandate that borrowers review their loan application certification which”[c]The current economic uncertainty makes this loan application necessary to support the applicant’s ongoing operations, ”said Scopelitis in his Law Alert.
The law firm noted that the mandate was not part of the original CARES law that set up the PPP, but was later issued “in response to a lot of negative publicity surrounding high profile borrowers.”
The $ 2 million threshold and the need to certify the need for these funds if a business obtains more than that causes some loan recipients to repay the money. The deadline for doing this without triggering a “good faith” investigation was Thursday but was pushed back to Monday.
“The SBA has determined that this safety rule is appropriate because borrowers with loans less than [the $2 million] are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers with larger loans, “the SBA said in its FAQ.” This safety rule will also promote economic certainty as PPP borrowers with more limited resources. strive to retain and rehire employees. “
The SBA also said the number of loans under $ 2 million would be difficult to investigate for their bona fide certification given the agency’s limited resources. “This approach will allow SBA to keep its limited audit resources and focus its reviews on larger loans, where the compliance effort can generate higher returns,” the agency said.
As of Friday, the SBA approved 2,571,167 loans under phase 2 of the PPP, for a disbursement of approximately $ 188.9 billion. Firms with less than $ 10 billion in assets got 32% of disbursed loans, while firms over $ 50 billion got 53%. The slice between these two got 15%.
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