Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
The Small Business Administration this week extended the window that business owners have to return loans they received through the Paycheck Protection Program.
In updated guidance issued Tuesday, the agency said it is extending its safe harbor period until May 14 from May 7. Borrowers do not need to take any action to apply for the extension.
The safe harbor period allows businesses that received money to ensure they meet the qualifications. Since the program was rolled out so quickly in response to the coronavirus pandemic, there has been some confusion and numerous changes made to different policies, which may have changed the eligibility of some applicants.
In guidance issued in late April, for example, the agency said borrowers needed to assess their need for the loan – certifying in “good faith” that the cash is a necessity to support ongoing operations. The agency said people need to take into account both their current business activity and their ability to access other sources of liquidity to support operations.
“For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,” the guidance read.
Alongside the new information released this week, the SBA suggested it will put out more guidance before the safe harbor deadline – which could render additional businesses ineligible for the loan.
Any company that returns the cash in full by the aforementioned date, however, will have been determined to have made the required certification in good faith.
The SBA said it plans to review all loans granted that are in excess of $2 million, as well as others.
Some larger companies have already committed to returning the funds after receiving criticism for having applied for the loans in the first place – including Shake Shack, Ruth’s Chris and AutoZone.
“Anybody that took the money that shouldn’t have taken the money, one, it won’t be forgiven, and two, they may be subject to criminal liability, which is a big deal,” Mnuchin said.
On Tuesday, the Department of Justice announced its first fraud charges against two New England men in connection with the program.