If your business or nonprofit borrowed $2 million or more under the Paycheck Protection Program (PPP), be aware that the Small Business Administration (SBA) has released a Loan Necessity Questionnaire that borrowers may be required to complete as part of the loan forgiveness phase of the program.
Two different versions of the questionnaire has been released, including Form 3510 for nonprofits and Form 3509 to be completed by for-profit businesses. On October 26, 2020, the SBA published a request in the Federal Registry requesting approval from the Office of Management and Budget (OMB) for approval of these forms. The public has approximately 25 days to comment to the OMB on these forms before they are finalized.
According to the SBA, the purpose of the questionnaire is to “facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the good-faith certification borrowers were required to submit as part of their PPP application.”
Loan forgiveness has been a lingering issue for businesses and non-profits since Congress passed the CARES Act earlier this year. As the SBA began accepting applications for loans under the Paycheck Protection Program, applicants were required justify the loan requests under specific terms. Applicants were asked to demonstrate that loans were essential because their “current business activity” and their ability to access “other sources of liquidity” was insufficient to support their ongoing operations without being significantly detrimental to the business.
Industry and financial professionals have received little guidance on what constitutes “current business activity,” “ongoing operations” or “other sources of liquidity,” as borrowers compiled facts and details required at the time of the application. As a result, supporting documents, financial information and other compliance required for certification has been an inexact process. In addition, the government has not issued specific information as to how loans over the $2 million threshold will be audited. They have stated, however that they are reviewing these loans to “maximize program integritBy and protect taxpayer resources.”
Timely Response will be Essential
In spite of the fact that many organizations have already filed loan forgiveness requests, including their good-faith certifications, borrowers who are over the $2 million loan threshold should be prepared respond promptly to their bank or directly to the SBA when questionnaires are received. According to the SBA, filers will have ten days to respond to the form once received from their participating institution. Timely response must include all supporting documents and signatures requested by the SBA.
Failure to respond promptly or to complete the form may result in SBA’s determination that the organization was ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and SBA may seek repayment of the loan or pursue other available remedies.
As of this writing, the questionnaires are still subject to final approval of the OMB and are not available on SBA’s website.
We Are Here To Help
As is true for most federal compliance issues, responses require careful consideration. If and when your business or non-profit receives a questionnaire, please do not hesitate to contact our Solutions Services Group for support or clarification on how best to respond.