URGENT PPP FORGIVENESS UPDATE: $2M “safe harbor” threshold


Congress has approved an extension of the PPP loan program. Applications may be submitted to SBA until May 31, 2021, including “second draw” PPP loans for businesses that received PPP funding in 2020.

Please note, though the PPP application deadline is being extended, you only have until May 31, 2021 to get your application submitted to the SBA. After that, the SBA will only process existing applications that have already been submitted, until the PPP deadline of June 30, 2021. 


In this 2-minute read:

  • New SBA / PPP rules as of 5/13/2020 set a “safe harbor” limit of $2 million
  • Businesses borrowing less than $2 million are deemed to have performed the required certification that the loan was necessary
  • It is more likely that loans larger than $2 million will be audited

On Wednesday, May 13, 2020 the SBA and Treasury revised their PPP loan FAQs that they are instituting a “safe harbor” threshold of $2 million in accepted loan funds. Businesses who have applied for or accepted loans below that limit will be assumed to be compliant with the requirements to certify that they needed the PPP loan. (The specific wording is available in questions 31 and 46 here.)

With the millions of businesses scrambling to apply for these emergency business loans, the SBA and Treasury are understandably concerned with preventing any “bad actors” who may be seeking to obtain PPP funding when it is not strictly needed, or who may fraudulently claim more payroll or business expenses on their applications than they actually have in order to get larger amounts of emergency funding.

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SBA focuses investigations and audits on PPP loans larger than $2 million

There have been several cases where larger businesses receiving large amounts of funding have been “shamed” into returning their PPP loan money, and this is understandable since the program was rolled out so quickly in order to get the maximum amount of help to the most businesses possible and the requirements for SBA loan approval were relaxed significantly for COVID-19.

In addition, the approval requirements have been somewhat of a moving target, with the SBA and Treasury releasing several updates and amendments throughout the process as new issues arose, and new rounds of funding were approved with revised rules.

However with public and government scrutiny increasing, investigations and audits may increase for loans over the “safe harbor” limit of $2M. With this May 13 update, the SBA appears to be focusing its resources toward investigating/auditing larger businesses and larger loans, where, they say, “the compliance effort may yield higher returns.”

As we pointed out in our article, Will my business be audited if I get a PPP loan, the requirements of the PPP state clearly that ANY business applying for such a loan must certify that they actually need the funding to maintain payroll and business operations curing the COVID-19 crisis. 

No business, no matter how small of a PPP loan they apply for, should consider themselves beyond investigation, particularly if they have misrepresented their urgent need for the funds. Consult an attorney if you have questions about your business’s eligibility under the economic need provision of the PPP. 


The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

If you haven’t applied, or you haven’t heard back about your PPP loan application with a large bank, consider applying with a smaller lender

If you are waiting for approval of your PPP loan via a large lender, we recommend you reapply via a smaller SBA approved lender ASAP. 

It is unclear if there will be another round of funding, and banks processing thousands upon thousands of applications may be overwhelmed, leaving businesses at the bottom of the list without PPP funding when the money runs out.

Due to the nature of the E-Tran system, it is highly unlikely that any business will be approved for multiple PPP loans, even if they have submitted more than one application.

Remember: you are not obligated to apply with your bank and the terms everyone receives on the PPP are identical—and it is always free to apply. 

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