Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
Continue Reading Below
Small business owners who applied for loans through the Paycheck Protection Program are worried about whether they still meet the program’s evolving eligibility criteria, but the government has given some clues as to which type of businesses and loans it intends to focus its enforcement efforts on.
The Small Business Administration updated guidance for the program Wednesday, as the safe harbor deadline – by which business owners can return their cash without repercussion if they believe they are no longer eligible – looms.
As previously reported by FOX Business, many business owners who applied for the loans in good faith are panicking over whether they will inadvertently find themselves in violation of the program’s updated terms.
But the SBA has offered more details on planned enforcement – which will likely bring some relief to anxious applicants.
After the agency caused concern and confusion late last month when it said borrowers needed to certify in “good faith” that the cash is a necessity to support ongoing operations – taking into account their ability to access other sources of liquidity – it now says borrowers who received less than $2 million will be deemed to have made that required certification.
“SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans,” the agency stated. “This approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.”
The agency has said it will largely focus its audits on companies that received loans valued at more than $2 million – and other loans “as appropriate.”
SBA has also clarified what will happen if a company is found to be in violation of PPP’s eligibility criteria following a review – specifically, the agency will not pursue administrative enforcement if the borrower repays the loan after receiving notification from the agency.
This could help to ease some concerns after the first PPP loan fraud charges were filed against two New England men earlier this month – and after Treasury Secretary Steven Mnuchin told FOX Business last week that anyone who took the money who shouldn’t have may be held criminally liable.
As of Tuesday, the SBA said PPP lenders had distributed more than $191.3 billion – the average loan size was about $72,296.
The safe harbor deadline for business owners who believe they do not meet the good faith certification requirement to return their money is Thursday.