The Treasury Department says paycheck protection loans under $ 2 million are typically not audited
The Treasury Department again issued new guidelines on emergency loans for small businesses hit by the coronavirus crisis on Wednesday.
“Any borrower who, with their affiliates, has received PPP loans with an original face value of less than $ 2 million is deemed to have presented the required certificate of necessity of the loan application in good faith,” states the final page from to updated guidance document published on the department’s website.
The Treasury Department previously determined that PPP borrowers had to certify to the Small Business Administration that the current economic uncertainty required their loan application to support day-to-day operations. It said it was “unlikely that a publicly traded company with significant market value and access to capital markets will be able to provide the required certification in good faith”.
Such warnings have resulted in at least 58 publicly traded companies repaying approximately $ 488 million worth of PPP loans on Thursday morning. Borrowers face today’s deadline to repay their forgivable loans.
About half of the roughly 400 PPP loans made to public companies cost less than $ 2 million, according to FactSquared. The updated guidelines suggest that these loans do not need to be returned.
A safe haven for loans below $ 2 million “is appropriate because borrowers with loans below this threshold were generally less likely to have access to adequate sources of liquidity in the current economic environment than borrowers who took out larger loans,” the guidance document says .
“This safe haven will also promote economic security as PPP borrowers with more limited resources try to retain and re-hire employees. Given the large volume of PPP loans, this approach will also allow the SBA to conserve their limited audit resources and focus their audits on larger loans where compliance efforts can lead to higher returns, ”she added.
“What is important is that borrowers with loans greater than $ 2 million who do not meet this safe haven may still have an adequate basis for the required escrow certificate.”
In late April, Treasury Secretary Steven Mnuchin promised the US government to examine PPP loans over $ 2 million as he warned of “criminal liability” for false certificates. A committee of the Democratic-led House of Representatives selected five publicly traded companies on Friday and asked them to repay their PPP loans.
Wednesday’s development was viewed by some lobbyists as a kind of softening.
“The pendulum of the PPP need seems to have swung back and is an important guide for VC-backed companies considering returning or filing an application for PPP.” Jeff Farrah tweeted, General Counsel of the National Venture Capital Association, which supports VCs in Washington.
This is an updated version of a story that was first published on May 13, 2020.