Payroll Protection Program Safe Harbor: COVID-19


As published earlier, President Trump signed the CARES Act (the “Act”) on Friday, March 27, 2020. The Paycheck Protection Program (the “PPP”) included in the Act dedicates $669 billion for businesses with 500 or fewer employees (including employees of your other affiliated entities) – that were in operation prior to February 15, 2020. As a requirement in applying for a PPP loan, small business owners must certify in good faith that the “current economic uncertainty makes the loan request necessary to support ongoing operations”. In an effort to prevent large businesses with significant market share from getting large PPP loans, SBA issued guidance on May 13th outlined here.

• SBA provides a safe harbor that looks favorably upon borrowers (collectively with their affiliates) who received PPP loans of less than $2 million, meaning those borrowers will be automatically deemed to have made a good faith certification
• Borrowers who received PPP loans of at least $2 million and cannot prove good faith must return the full loan amount by May 18, 2020 or otherwise may be subject to audit and enforcement proceedings by the SBA and other federal agencies

• Partnerships that have already received PPP loans can subsequently increase their loan amount to include compensation for their partners, if not done so already
• In such event the lender must submit a request through SBA’s E-Tran Servicing system provided it has not yet submitted the SBA Form 1502 report to the SBA

• As of May 14, 2020, $120 billion is remaining for the SBA to issue additional PPP loans

The attorneys at Underwood are available to answer questions regarding the Act. Please reach out to your contact at Underwood or to Mitchell Moses (; (806) 239-9992).

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