Paycheck Protection Program Safe Harbor Guidance

by John Privette

On May 13, the U.S. Small Business Administration (SBA) issued guidance for small businesses receiving less than $2 million of Paycheck Protection Program (PPP) funding. The U.S. Treasury in coordination with the Small Business Administration issued “safe harbor” guidance for borrowers as published in the SBA’s FAQ, Question 46. The SBA FAQ states: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

This safe harbor guidance results from the realization that businesses with PPP loans less than $ 2 million are “less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”

PPP Loan Forgiveness

To be considered for PPP loan total forgiveness, at least 75% of the loan must be used for payroll expenses (salary, wages, commissions, group health insurance, vacation, retirement, and parental, family or medical and sick leave). The other 25% can be used for rent, mortgage interest and utilities.

Best practices for borrowers in preparation for forgiveness consideration includes:

  1. Record the PPP loan deposit date and the eight-week period ending date to remind yourself of the time period requirements.
  2. Preferably, establish a separate checking account for the PPP loan and keep a detailed record and documentation for forgivable expenses.
  3. As a sole proprietor or LLC business, write a check to yourself as evidence of payroll payment weekly. Cash withdrawals or cash transfers to yourself are weak evidence of payroll.
  4. To avoid a reduction of total forgiveness and meet the 75% payroll requirement, maintain the number of employees, wages and hours. A reduction of forgiveness amount is required if the reduction of wages over the 8-week period is in excess of 25% of the total salary or wages of the employee during the period of January 1, 2020 through March 31, 2020.

Help is Available

This tip represents our understanding of the PPP guidance at this time with the realization that SBA guidance may change. Visit the Wyoming SBDC Network website for additional COVID-19 resources. You can also contact your local business advisor for no-cost, one-on-one COVID-19 business assistance at