Paycheck Protection Program


Whether you’ve received a loan under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), or you’re in the process of applying, we want to provide two important reminders:

  • The program's intent is to provide funds for payroll and certain other approved expenditures for borrowers who have determined, in good faith, that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant."

  • Eligibility to apply is the borrower’s responsibility to determine and certify. 

Federal Guidance on Eligibility

On April 23, 2020, 20 days after applications could first be submitted for PPP loans, the Treasury and SBA provided their first guidance on the "need" issue in the form of Frequently Asked Question 31 (FAQ 31), which states:

Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. 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.

On April 28, 2020, the Treasury issued further guidance in FAQ 37, which confirmed that the guidance provided earlier in FAQ 31 applies equally to both publicly-traded and private companies.

Additionally, on April 28, Secretary of the Treasury Steven Mnuchin announced that the SBA would conduct a "full review" of every PPP loan of $2 million or more, in addition to other loans as appropriate, to determine whether the borrower met the requirements for participation in the program prior to loan forgiveness.  

On May 13, the SBA issued FAQ 46 to provide additional clarity for borrowers regarding how the SBA will review borrowers’ required good-faith certification of the necessity of their loan request. You can review the full response by the SBA to FAQ 46 here.

Additionally, the SBA is extending the repayment date for the safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ 46. 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.

Considerations Based on Guidance

  • Review necessity – All borrowers under the PPP, regardless of loan size, may wish to review their determinations of whether the loan was necessary to support ongoing operations.

  • Returning funds – For any borrowers who determine, in retrospect, that the loan may not have been necessary, and who applied prior to April 23, 2020, the SBA and Treasury are affording the borrower safe harbor to return the loan funds on or before May 18, 2020. For those borrowers who return funds by May 18, 2020, the SBA and Treasury will deem the certification regarding "need" to have been made in good faith.

  • Review window – The safe harbor date of May 18, 2020, to return the funds may also provide borrowers who applied prior to April 23, 2020, with a second opportunity to further evaluate all of their bases for eligibility, including the application of the SBA's affiliation rules if a full analysis of those rules was not conducted during the initial application process. Please note that the SBA has not provided guidance on the return of funds for borrowers who applied after April 23, 2020. This does not preclude a borrower from repaying their loan.

  • Seeking counsel – While the SBA's recent guidance does not specifically reference any eligibility certifications outside of "necessity" for the loan, a borrower who has questions about a potential eligibility issue may wish to seek counsel about addressing this or any other issue before May 18.

  • Potential penalty – If the SBA determines any certification was not made in good faith, the borrower may be subject to non-forgiveness of the loan or civil or criminal liability.

Please review the full and latest FAQ guidance. You will also want to familiarize yourself with the PPP statutory and regulatory provisions for all applicants and continue to monitor guidance from the SBA for future guidance.

Repaying Funds

Some borrowers have elected to repay their PPP loans or are planning to do so before the May 18 deadline as a result of these guidelines. If you have questions about the process, or if you have already received funding from First Horizon for a PPP loan and wish to repay your loan in full, please contact your banker as soon as possible for assistance.

Not intended as legal advice. Consult with your legal advisor if you have additional questions.