Under the Paycheck Protection Program (“PPP”), borrowers who received a PPP loan in excess of $2 million have known since April that their loans would be subject to an audit and additional scrutiny by the Small Business Administration (“SBA”).
On October 26, 2020, SBA published a notice in the Federal Register seeking approval of the Office of Management and Budget (“OMB”) to release two new forms under the PPP titled the Loan Necessity Questionnaires, which include Form 3509 for-profit borrowers and Form 3510 for non-profit borrowers (collectively the “Loan Necessity Questionnaires”). You can find a link to Form 3509 here and Form 3510 here.
At this time, the questionnaires are still subject to the final approval of the OMB and have not been officially published by the SBA.
As of the date of this alert, the Loan Necessity Questionnaires state that PPP borrowers with PPP loans of $2 million or more will be required to complete the relevant questionnaire. The Loan Necessity Questionnaires are required to be distributed by PPP lenders, and the PPP borrower must return the completed form, along with supporting materials, within 10 business days of receipt from the lender. According to the SBA, failure to return this information in a timely manner “may result in a determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed.”
The Loan Necessity Questionnaires request information from PPP borrowers regarding revenue, expenditures, capital improvements, liquidity, and affiliation, and supplementary documentation will be required. On an initial read of the Loan Necessity Questionnaires, they appear to identify factors that the SBA may consider or analyze in the SBA’s audit of loans of $2 million or more. However, the SBA has not clarified how the information provided in the questionnaires will be evaluated or under what circumstances the SBA will deny forgiveness.
Given that the Loan Necessity Questionnaires have not yet been formally published and released, it may be best for borrowers to await official guidance before making any immediate decisions or taking immediate action. However, PPP borrowers should consider taking time now to prepare the relevant information and documentation in anticipation that this form will need to be completed once received from their PPP lender, particularly because of the short turnaround time for completion.
If you have questions about the Loan Necessity Questionnaires, our PPP Loan Application and Audit Team can help.
Please contact Jim Seifert at james.seifert@fmjlaw.com or Bob Fafinski at robert.fafinski@fmjlaw.com.
Related Attorneys
