PPP Update: SBA Announces Loan Necessity Questionnaires
Late last month on October 26, 2020, the Small Business Administration (SBA) issued a notice that pertains to borrowers who received Paycheck Protection Program (PPP) loan funds equal to or in excess of $2 million. Recipients of funds that meet the $2 million or more threshold will be required to file a form entitled - "Loan Necessity Questionnaire." If the recipient is a for-profit borrower, they will be requested to file Form 3509 and, similarly, non-profit borrowers will be requested to file Form 3510. These forms are intended to address and help support the borrowers' good faith certifications that current economic conditions caused the necessity of a PPP loan in order to help sustain ongoing business operations. The SBA is estimating that 52,000 borrowers (42,000 for-profit and 10,000 non-profit) will be affected.
The forms have not yet been officially released; however, from versions that expired on October 31, 2020, they appear to address, but are not limited to, two major categories and related points listed below:
Business Activity Assessment
- Questions regarding revenues, gifts, grants, and contributions
- Whether the borrower had to cease or alter business operations
- Whether any new capital improvement projects not due to COVID-19 were begun
Liquidity Assessment
- Questions regarding amounts of cash, cash equivalents, and investments
- Whether any employee was compensated an annualized amount of more than $250,000
- Did the borrower directly receive other funds from the CARES Act excluding the PPP
The forms will be issued by the borrowers' lenders. The SBA did make it known that lenders are not responsible for authenticating responses or related documentation. It should be noted that these forms are not intended to be used to challenge the legitimacy of the borrowers' good faith certifications, but rather as a further step in the forgiveness process for high dollar loan amounts in order to uphold the integrity of the PPP loan program.
If you have questions about PPP loans or the information presented above, please contact an HHM professional.