Have you been considering returning your Paycheck Protection Program Loan? The deadline to take advantage of the safe harbor has been extended from May 7 to May 14, 2020.
You have likely been confronted with news stories, emails, and IRS updates criticizing the PPP loan structure and criticizing some of the largest borrowers who participated in the PPP. It has become apparent that loans given under the PPP will be subject to additional scrutiny. If you have received your PPP loan, you may have some questions or concerns about the ever-changing rules.
In particular, recent comments by Treasury Secretary Mnuchin related to the review of the liquidity needs for business taking PPP loans have the attention of many, particularly the certifications on the underlying PPP loan application that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
The SBA has attempted to issue clarification through the release of its Paycheck Protection Program Loans- Frequently Asked Questions, but these FAQs have only spurred additional confusion with the use of imprecise terms, especially in the wording of FAQ 31. Many borrowers are now considering whether they remain comfortable with the certification on their application. If this certification was not made in good faith, borrowers can face serious civil and criminal penalties. The SBA has extended to May 14th the deadline to return PPP loan proceeds in order to avoid any adverse consequences related to certifying that the loan was “necessary.” However, as the economic realities of the COVID-19 pandemic set in, many borrowers are reluctant to return the financing without strong justification.
So, where does that leave PPP loan borrowers? Does this guidance have an impact on your organization? Are you permitted to keep the loan you’ve already received? Will your loan be scrutinized and your organization subject to extensive penalties?
The questions that arise as a result of this uncertainty are very fact-specific. For this reason, the attorneys at Critchfield, Critchfield & Johnston have made it a priority to stay up-to-date and achieve a thorough understanding of new guidance as it is released. We would be happy to guide you through this uncertain time. For more information or to discuss circumstances that are unique to your organization, please call us at one of our five locations during our current office hours of 8am-5pm.