Q: “How should we decide whether or not we should return all or some of our PPP loan before 5/7?”

A: If you received PPP loan funds and have been grappling with whether or not to return the funds by May 7 to avoid liability (see our original article on the topic here), below are a few factors to keep in mind when making this important decision:

• The SBA confirmed that all companies receiving more than $2 million in PPP funds, and other loans as appropriate, will be reviewed by the SBA.
• When reviewing your specific facts, consider the following very high-level questions and be sure that you have adequate documentation to support these facts if you choose to keep the loan funds:
  • Whether because of the COVID-19 crisis, there was economic uncertainty that negatively impacted the business (e.g., changes in revenue, negative supply chain impacts, etc.) – if not, loan funds should likely be returned.
  • Whether the PPP loan was necessary to keep business operations running (see the bullet point below as a follow up) – if not, loan funds should likely be returned.
  • Whether the business has access to other sources of capital, such as through the public securities market, private equity, or hedge funds – if so, loan funds should likely be returned.

Update: on the evening of May 5, 2020 after the original publication of this article, the SBA announced that the deadline for returning loan funds by May 7, 2020 to be eligible for the safe harbor for making the economic necessity certification in good faith has been extended to May 14, 2020 (see FAQ#43). Borrowers do NOT need to apply for this extension and it will be implemented through a revision to the interim final rule. Additional guidance will be released by the SBA in advance of May 14, 2020 on this certification review process.