Updated May 8, 2020
The SBA provided the following updated guidance regarding the Safe Harbor deadline for borrowers. We expect revised interim final rules on this subject by early next week (given that Thursday, May 14, 2020 is the deadline) and will provide further updates as soon as possible.
While the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit from other means, borrowers applying for PPP funds must still certify in good faith that “[c]urrent economic uncertainty makes the loan request necessary to support the ongoing operations of the Applicant.” Recent guidance from the SBA suggests that, in making this certification, applicants take into account their current business activity as well as the ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business.
Scrutiny of federal relief funds secured under the Paycheck Protection Program (PPP) is expected to be intense. Congress created a special oversight mechanism designed to uncover fraud in the relief awards and ensure that all loans were pursued in good faith. The Trump administration has specifically vowed to audit all loans over $2 million, and some prominent public companies have already announced they will be returning the funds.
A deadline of May 14, 2020 was recently set for participants in the PPP program to repay their loans in full to avoid any future determination of bad faith.
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The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or feel free to contact a member of the Commercial Finance Practice Group.
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