Special Alert | PPP loans

Safe harbor repayment date extended; ongoing guidance updates

Amy S. Matsuo

Amy S. Matsuo

Regulatory and ESG Insights Leader, KPMG US

+1 919-664-7100

Safe harbor repayment

The SBA and Treasury have published a new Frequently Asked Question (FAQ) for the Paycheck Protection Program (PPP), FAQ #43, which asks whether borrowers seeking to repay a PPP loan in full by May 7, 2020, would be able to receive an extension on the repayment date.

In response, the SBA and Treasury state they are extending the repayment date to May 14, 2020, and borrowers do not need to apply for the extension. Further, SBA intends to release additional guidance on the how it will review the certification of need in the Borrower Application Form prior to May 14.

The SBA and Treasury established the May 7, 2020 repayment date in FAQ #31, which provided a safe harbor for any borrower that applied for a PPP loan prior to April 24, 2020, and repays the loan in full by May 7, 2020, indicating they “will be deemed by SBA to have made the required certification in good faith.” FAQ #31 reminded borrowers they must certify in good faith that their PPP loan request is necessary to support their ongoing operations, taking into consideration their current business activity and their ability to access other sources of liquidity. FAQ #37 was subsequently published to clarify that the certification requirements and the safe harbor applied to both public and private companies.

Additional guidance

Since April 24, the SBA and Treasury have published additional guidance on the PPP through fourteen (14) new FAQs, covering a range of topics including borrower eligibility, employee counts and compensation, and SBA loan reviews. The agencies also published five (5) new interim final rules covering seasonal employers; disbursements; corporate groups and nonbank and non-insured depository lenders; promissory notes, authorizations, affiliations, and eligibility; and nondiscrimination and additional eligibility criteria for nonprofits.

To date, no formal guidance has specifically addressed the forgiveness process that is provided in Section 1106 of the CARES Act. PPP loans can be forgiven up to the full principal amount of the loan plus any accrued interest provided the loan funds have been used for payroll, mortgage interest, rent, and utilities subject to certain requirements. Requests for loan forgiveness are expected to be submitted beginning May 29, the end of the first eight-week period of the PPP. SBA has stated additional guidance is forthcoming.

A complete set of FAQs and links to the interim final rules is available here.

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