On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (SBA) is offering loans under the Paycheck Protection Program (PPP). On April 2, 2020, the SBA issued an interim final rule (Initial Rule) outlining the key provisions for implementing the PPP, including requiring each borrower to certify in the Borrower Application Form (SBA Form 2483) that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” On May 24, 2020, the SBA issued an interim final rule with a limited safe harbor providing that any borrower that receives a PPP loan based on a misunderstanding or misapplication of the required certification standard and repays the loan in full by May 7, 2020, will be deemed by the SBA to have made the required certification in good faith.

On May 8, 2020, the SBA issued another interim final rule (IFR) extending the limited safe harbor for the certification concerning the need for funds from the PPP from May 7, 2020 to May 14, 2020. In addition, because of the extension of the safe harbor deadline, the SBA extended the deadline for PPP lenders to submit SBA Form 1502 for PPP loans that were approved before the availability of the updated SBA Form 1502 reporting process, from May 18, 2020 to May 22, 2020. This IFR is effective immediately. Public comment on the proposed rule must be received on or before June 18, 2020.

On April 24, 2020, the SBA posted an interim final rule relating to promissory notes, authorizations, affiliation, and eligibility in connection with the implementing the PPP (see Legal Update, CARES Act: SBA Issues Further Guidance on Promissory Notes, Authorizations, Affiliation, and Eligibility Under Paycheck Protection Program). This interim final rule also provided safe harbor relief to PPP borrowers who applied for and received PPP loans based on a misunderstanding or misapplication of the required certification standard. The safe harbor provided that any borrower that applied for a PPP loan and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.

On May 8, 2020, the SBA issued the IFR providing that the SBA will issue additional guidance before May 14, 2020 about how they will review the required certification to help PPP borrowers evaluate whether they may have misunderstood or misapplied the statutory certification standard. Based on this upcoming guidance, the SBA extended the safe harbor deadline for repaying PPP loans from May 7, 2020 to May 14, 2020.

The SBA determined that the extension of the safe harbor in the IFR requires a corresponding change in the date by which PPP lenders must submit SBA Form 1502 information for loans that were approved before the availability of the updated SBA Form 1502 reporting process. That date has been extended from May 18, 2020 to May 22, 2020.

For summaries of the SBA PPP, see:

For additional guidance from the Treasury Department, see: