treasury department updates small business loan rules

The Treasury Department has issued a statement providing what is called a “safe harbor” for some loans provided under the Paycheck Protection Program.

In a new guidance, the Department has declared that any small business that “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.”

Earlier, the Department required that businesses trying to obtain funding through the PPP must first certify to the Small Business Administration that they needed that funding because of the economic upheaval caused by the COVID-19 outbreak.

Now the Department is declaring that not requiring some small businesses to pay back loans under the amount of $2 million 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 Treasury Department announcement continues: “This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.”

Businesses that have so far received loans of more than $2 million will still be required to repay.

The new guidance is additionally seen as providing some air for the SBA’s staff, which can now focus its reviews on larger loans, “where the compliance effort may yield higher returns.”

A number of professional groups had called upon the Treasury Department in recent days to clarify its PPP rules.
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In a statement, the American Institute of CPAs remarked: “The last thing we need is for deserving businesses to lay off employees and close their doors because ever-changing rules and the threat of civil penalties scared them away from the PPP.”

​By Garry Boulard

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