SBA Proposes Questionnaires for PPP Borrowers with Loans $2 Million and Above
On October 26, 2020, the SBA published a notice requesting approval from the Office of Management and Budget (OMB) to collect information from Paycheck Protection Program (PPP) borrowers with loans of $2 million or greater in the form of two loan necessity questionnaires.
11.05.20
The two questionnaires appear to be part of a continued effort by the SBA to gather data regarding PPP borrowers. In particular, the questionnaires request information relating to the certification that PPP borrowers made in their original loan application that economic uncertainty made the loan request necessary to support the ongoing operations of the borrower’s business.
As of November 4, 2020, the SBA has not formally implemented the questionnaires or posted the documents on its website. The only announcement addressing the questionnaires is the SBA’s required notice in the Federal Register. Copies of the questionnaires, Form 3509 (relating to for-profit entities) and Form 3510 (relating to non-profit entities), are circulating online, but the SBA has not acted to confirm or deny the proposed forms.
The SBA forms seek detailed financial information from the PPP borrower concerning its circumstances and operations in connection with the COVID-19 pandemic, including information relating to the “covered period” for which PPP loan forgiveness is available. The for-profit questionnaire includes a Business Activity Assessment and a Liquidity Assessment, which request the following (among other information):
- What was the borrower’s gross revenue in Q2 2020 and Q2 2019?
- Was the borrower required to shut down or significantly alter its operations by a state or local authority due to COVID-19?
- Did the borrower voluntarily cease or reduce its operations due to COVID-19?
- Did the borrower commence any capital improvement projects not as a result of COVID-19?
- What were the borrower’s cash and cash equivalents on the last day of the calendar quarter prior to the PPP loan application?
- Did the borrower pay any dividends or capital distributions to its owners during the covered period?
- Did the borrower prepay any outstanding debt during the covered period?
- Has any employee or owner been compensated in an amount exceeding $250,000 on an annualized basis during the covered period?
Based on the instructions for the form available online, the questionnaire, together with supporting documentation, will be due within 10 business days of the PPP borrower’s receipt of the document from its lender. In the event that a PPP borrower has already submitted its forgiveness application, the borrower is expected to receive a notice requesting completion of the questionnaire through the SBA Forgiveness Platform.
The SBA Subgroup of the Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops and the PPP loan program is implemented.
Elizabeth Webb Bucilla is an associate in the Corporate & Securities Department at Klehr Harrison.