In April 2020, the U.S. Small Business Administration (SBA) established the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) to provide forgivable loans to businesses adversely impacted by the Coronavirus Disease 2019 (COVID-19) pandemic. Many PPP borrowers that are eligible for loan forgiveness are now completing the applicable PPP Loan Forgiveness Application. On October 26, 2020, SBA published a notice in the Federal Register seeking public comments on two proposed PPP questionnaires – one for for-profit borrowers (SBA Form 3509) and the other for non-profit borrowers (SBA Form 3510).
The purpose of the two questionnaires is to facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the prior good-faith certification that a PPP borrower made in its PPP Borrower Application Form that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Each PPP borrower (together with its affiliates) who received loans with an original principal amount of $2 million or greater will be required to complete the applicable questionnaire along with supporting documents and submit it to the lender within 10 business days of receipt from the lender. In the questionnaires, SBA asks for detailed information. For example, in the questionnaire for for-profit borrowers, SBA asks questions such as what was the borrower’s gross revenue in the second quarter of 2020 and the second quarter of 2019 respectively, whether the borrower has voluntarily ceased or reduced its operation due to COVID-19 and whether the borrower has paid any dividends to its owners or prepaid any outstanding debt between March 13, 2020 and the end of the loan forgiveness covered period. The questionnaires suggest that SBA may not only focus on the borrower’s economic uncertainty and access to liquidity at the time of making the original loan application, but may also consider other post-application factors in determining whether the borrower made the necessity certification in good faith.
A PPP borrower’s failure to complete the applicable questionnaire and provide the required supporting documents may result in SBA’s determination that it 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. SBA is still seeking public comments on the two proposed questionnaires, and public comment period will expire on November 25, 2020.