SBA Offers Temporary PPP Reprieve, Says to Stay Tuned

May 7, 2020

By Brian Walsh, Faith and Giving Coalition

– Will the next guidance allay faith-based nonprofits’ concerns? 

 Leaders in Congress and the Administration are paying attention to the concerns we have been conveying over new Paycheck Protection Program (PPP) guidance SBA issued last month. Broad terminology in that guidance created significant confusion among faith-based and other nonprofit borrowers. (See May 1 CARES Act Update below.)

Last week, we suggested the Administration might issue new guidance this week. Clarifying guidance is needed because FAQs #31 and #37 appear either to cover all PPP borrowers, including nonprofits, or to cover only publicly traded and other well-funded for-profit businesses. This confusion has made it unclear what analyses a nonprofit must or should conduct and document before it certifies that a PPP loan is necessary to its ongoing operations.

Yesterday, the Administration did indeed issue additional guidance directed at this confusion and uncertainty. The guidance is preliminary and indicates we may see more in the next few days.

First, yesterday’s new FAQ #43 extends by one week—from May 7 to May 14—the safe-harbor deadline by which an organization can fully repay its PPP loan without facing questions based on last month’s new FAQs.

Further, the guidance states that SBA “intends to provide additional guidance” before May 14. If this guidance does indeed emerge, SBA says, it will address “how it will review” a borrower’s PPP certification that “current economic uncertainty” makes a loan “necessary to support [its] ongoing operations.”

As always, any organization working through questions involving the PPP program and this new guidance should consult an attorney who is well-versed in SBA programs and related areas.

Based on this latest guidance, some organizations continue to suggest that financially struggling faith-based organizations may decide to hold off canceling PPP applications or fully repaying PPP loans until closer to the May 14 safe-harbor deadline.

The full text of new FAQ #43 states:

  1. Question:  FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.  Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer:  SBA is extending the repayment date for this safe harbor to May 14, 2020.  Borrowers do not need to apply for this extension.  This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.  SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

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