Recent actions by the Small Business Administration and Federal government officials raised concerns among borrowers regarding Paycheck Protection Program loans and possible future government oversight and enforcement activity. In its Frequently Asked Questions No. 31, the SBA reminded PPP borrowers that they are required to certify that current economic uncertainty causes their PPP loan request to be necessary to support their ongoing operations. PPP loan applicants are required to make this certification in good faith, considering 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 their business. This caused many borrowers to consider not taking a PPP loan or repaying PPP loan funds that they had already received. In FAQ No. 39, the SBA confirmed that it will review all PPP loans over $2 million and will review other smaller loans “as appropriate”.

FAQ No. 31 further provided that any PPP loan recipient which repaid its PPP loan by May 7, 2020 would be deemed to have provided this certification in good faith, thus providing a safe harbor for loan recipients who had decided that they may not be eligible for a PPP loan and who wanted to repay the funds. This deadline was extended to May 14, 2020 and then to May 18, 2020.

The SBA issued additional guidance on May 13, 2020 that should help to ease some of the concerns that had arisen among PPP borrowers. New FAQ No. 46 says that any borrower that, together with its affiliates, received PPP loans of less than $2 million will be deemed to have made the required certification of necessity for the loan request in good faith. This creates a safe harbor for borrowers of smaller loans in connection with the required certification of necessity.

This new guidance also contained some positive news for borrowers with loan balances greater than $2 million as FAQ No. 46 said that if the SBA later determines that a borrower lacked an adequate basis for the required certification of necessity for the loan, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from the SBA, the SBA will not pursue administrative enforcement and will not make referrals to other agencies based on this situation.

Current and prospective PPP loan borrowers should in all cases continue to carefully review and analyze their eligibility for a PPP loan and make appropriate decisions regarding keeping or returning such loan funds. All PPP loan recipients should carefully and completely document their need for such funds now in anticipation of having to justify the need for such funds in the future. We are happy to work with you in connection with the preparation of any such documentation.

See the SBA’s most recent PPP FAQs here.

If you have any questions, please contact Gunster Technology & Emerging Companies practices leader, Robert White.

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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, Vero Beach, and its headquarters in West Palm Beach. With more than 240 attorneys and consultants, and over 240 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at


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