Do I Need to Consider Returning My PPP Loan Funds?

Please note that this blog is based on laws effective on May 5, 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.

UPDATE as of May 13th: Please click here to read the latest information on returning your PPP loan funds.

UPDATE as of May 6th: The SBA FAQ has recently been updated to extend the May 7, 2020 repayment deadline to May 14, 2020. Borrowers do not need to apply for this extension. The SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

We recently provided guidance on how to spend your Paycheck Protection Program (PPP) loan funds in order to receive maximum forgiveness. However, we’re now being asked a new question: “Should I return the PPP funds I’ve received?”

This question has arisen as a result of negative publicity surrounding large companies receiving PPP funds. And the answer to this question, of course, depends on your specific situation.

First, it’s important to understand that your PPP loan certification includes the following language:

  • “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
  • “The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.”

The last line – “indicating legal liability and potential for fraud charges” – is what is sparking concern for businesses that have PPP loan funds.

Here’s what has happened since you filed the loan certification:

  • On April 23, the US Treasury issued FAQ #31, which states: “All borrowers must assess their economic need for a PPP loan…(and) carefully review the required certification that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’ 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.”
  • FAQ 31 further states, “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith.”
  • On April 28, Treasury Secretary Mnuchin announced the SBA “will review all loans in excess of $2 million, in addition to other loans as appropriate.”
  • On April 28, the US Treasury issued FAQ #37, which indicates that FAQ #31 applies to all businesses.

How will the SBA determine that I need a PPP loan?

Like much of the PPP process, we don’t have all of the answers right now. But this is what we do know:

  • The FAQ guidance reflects that the SBA envisioned this program to support those companies that could not sustain ongoing operations without the funds.
  • We expect the SBA to scrutinize a business’ ability to tap current cash reserves or other sources of credit required to maintain ongoing operations.
  • The SBA should consider “current economic uncertainty” as part of this analysis.

Can I return some of the PPP loan proceeds if I am concerned about SBA penalties?

  • The good faith certification safe harbor is only available if the entire loan is repaid by May 14, 2020. If you are concerned about the penalties that may be assessed by the SBA because you cannot adequately display a good faith need, you should consider returning the funds.
  • If you are confident that you can support your certification, you would not need to rely on this safe harbor provision.
  • If you decide to repay a portion of the funds, you would not need to repay this portion of the PPP loan, but under current guidance you would still be subject to scrutiny of your certification.

How do I best document my need for the PPP loan?

Assume that your loan will be scrutinized, especially if your loan exceeded $2 million. Thus, you should prepare to show:

  • Projections of cash flow and revenues before, during, and after the pandemic. Our best practice is to keep a rolling 12 to 16-week cash flow projection even beyond the covered period – through at least the end of 2020.
  • Availability of cash or other financial reserves to the company.
  • Company access to other sources of credit. Pay particular interest to the existing bank covenants that you may have as a reason for applying for the PPP loan.
  • Consider your substantiation of capital and workforce preservation. Replacing a workforce is costly, takes time, and can be detrimental to the ongoing operations. These funds are necessary to support the workforce during the pandemic and will allow the business to resume once shelter in place orders are lifted.
  • Start creating the narrative as to why you had the economic uncertainty when you applied for the loan. Uncertainly of collections on receivables, vendor requirements for advanced payments, borrowing bases on line of credit shrinking due to receivables falling off of aging, etc.

As always, we are here to support you as you work through the impact of PPP on your business. Call Cray Kaiser with your questions at 630-953-4900.


These are certainly trying times and we want to reiterate that Cray Kaiser is here for you. As things continue to evolve in light of the COVID-19 pandemic, we at CK are taking additional precautions for the benefit of our team members and our clients.

Effective immediately:

  • No clients or guests will be allowed in our suite.
  • All in-person meetings are cancelled. Instead, we will be utilizing phone calls and/or email to communicate with our clients.
  • Our team members are being encouraged to work remotely. All staff are equipped with the appropriate technology and resources to continue to securely and confidentially serve you from home.
  • We will no longer have in-person drop offs of accounting/tax data. Instead, please drop off any packages outside the office door of our suite in the box provided.
  • All paper files, tax returns etc. will no longer be mailed by our office to you. We will be holding these items in our office to send to you at a later date.


We want to remind our clients of our portal access and your ability to safely and securely share your information with our team. We ask that you email to request your portal access. This will eliminate the need for you to drop off your tax information at our office.


Thank you for your patience and understanding during this challenging time. We wish you, your family, and your business health and safety. We will continue to support you as best as we can while keeping each other’s health a priority. If any changes occur during the course of the next few days, we will update our website.

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