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$2 Million PPP Safe Harbor Announced by SBA
May 13, 2020

All information in this COVID-19 Response Resource issue is effective as of May 13, 2020.

The Small Business Administration (SBA) has just published additional guidance in the form of FAQ # 46 which provides for a safe harbor for eligibility for those applicants whose Paycheck Protection Program (PPP) loan is below $2 million. Under the safe harbor, an applicant’s loan request will be deemed to have been made in “good-faith” for purposes of making the certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The safe harbor allows applicants with loans under $2 million to have outside liquidity and still be eligible for the PPP loan, but does not necessarily guarantee forgiveness for these applicants.     

The safe harbor helps to clarify eligibility for the vast majority of PPP loan recipients and will likely increase use of the program’s remaining $129 billion in funds.    

Critically, to be eligible for the safe harbor, an applicant must apply the SBA’s affiliation rules and aggregate all PPP loans of affiliated entities. The affiliation rules are multi-faceted and include concepts of identity of interest, negative control and ownership. 

Applicants whose PPP loan exceeds $2 million should expect significant scrutiny of their application and associated certifications as the SBA concentrates audit resources on these applicants. Applicants that are outside of the safe harbor should consider documenting their eligibility to determine if they should return the PPP loan ahead of the May 14, 2020, amnesty.        

SBA’s Rule 46: 

Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request? 

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: 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 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. This safe harbor will also promote economic certainty, as PPP borrowers with more limited resources endeavor to retain and rehire employees. 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. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. The SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by the SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form.

If the SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from the SBA, the SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. The SBA’s determination concerning the certification regarding the necessity of the loan request will not affect the SBA’s loan guarantee. 

To discuss this or related issues, contact Matthew Cook at 801.536.6819 or send an email to or call Ross Keogh at 406.206.9710 or send an email to