US Politics

Firms That Took a PPP Loan Under $2 Million Get Safe Harbor Break

The Trump administration said firms that took loans of less than $2 million under the COVID-19 small business relief program can count on a break in the form of not having to prove to auditors that the pandemic had a negative impact on their business.

New guidance issued Wednesday (pdf) for the Paycheck Protection Program (PPP) by the Small Business Administration (SBA) and the Treasury Department said all loans granted under the $2 million threshold will be seen as having met the “good faith” standard, namely that “current economic uncertainty” justifies their need for the loan because theyre less likely to have access to other resources.

The guidance appears to assume that all smaller businesses have suffered financial hardship in some way amid the outbreak of COVID-19, the disease caused by the Chinese Communist Party (CCP) virus, the novel coronavirus that emerged from Wuhan, China, late last year and spread across the globe.

“Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith,” the SBA and Treasury said in the new guidelines.

treasury department
treasury department The U.S. Treasury Department building in Washington, on Oct. 18, 2018. (Mandel Ngan/AFP/Getty Images)

Besides assuming smaller borrowers have less access to liquidity amid the pandemic-driven economic crunch and so a “safe harbor” for them is justified, the SBA and Treasury said giving such firms a break will help them keep and rehire employees.

“This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees,” the two agencies said.

The move will also let federal authorities focus their limited auditing capacity on bigger players.

“In addition, given the large volume of PPP loans, 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 SBA and Treasury said.

Epoch Times Photo
Epoch Times Photo A pedestrian walks past a closed Artisan House restaurant in Los Angeles on May 7, 2020. (Frederic J. Brown/AFP/Getty Images)

Also, companies that took loans over the $2 million mark will still have the opportunity to make a case that they took the loan in good faith. They will be subject to a compliance review to check if they met PPP requirements. Companies that are unable to prove they need the loan will have to repay the balance and they will be ineligible for loan forgiveness.

Also, firms that took loans of more than $2 million that they didnt need will be allowed to repay the money without legal consequences. This reverses an earlier warning that the government could pursue such loan-takers criminally.

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