At the end of October, lenders who had submitted PPP loan forgiveness applications for a company that, together with its affiliates, received $2,000,000 or more in PPP financing began receiving a response from the U.S. Small Business Administration (“SBA”) requiring the completion of a new Loan Necessity Questionnaire by the PPP borrower and submission of same with supporting documentation. There are two different Questionnaire forms, Form 3509 and Form 3510, which will be used by SBA reviewers to gather information and assess certifications made by the PPP borrower regarding the need for PPP financing. Form 3509 will be required from any for-profit company and Form 3510 from any non-profit company.
The Loan Necessity Questionnaires are nine pages each and cover a variety of topics. There are several questions devoted to business activity. These questions request data regarding revenues for 2020 and 2019. They also request information regarding any shutdown orders, or orders to reduce operations that impacted the business. There are also questions around voluntary reduction in operations and the causes of such decisions, for example outbreaks of Covid-19, disruptions in supply chains, or restrictions on workspaces. Throughout this section, borrowers are provided an opportunity to add comments describing the details of their business activity.
The second section of the forms are focused on liquidity. The questions in this section focus on cash holdings of the company as well as compensation to employees. For for-profit companies, questions in this section address topics such as ownership by publicly traded companies, foreign companies, private equity or venture capital firms. There are also questions surrounding total compensation to owners. For non-profit companies, there are questions regarding endowments, non-cash investments, and income based upon industry.
Borrowers are required to submit the Loan Necessity Questionnaire along with any supporting documentation within ten business days of Lender’s request. SBA will use this information in order to assess the economic need for the PPP loan; however SBA states that receipt of the form does not necessarily mean that SBA is questioning the certification made by the PPP borrower in the loan application. Based upon responses to the questionnaire, SBA may request additional information from the borrower and will base any determinations on a totality of the circumstances.
Lenders will be required to obtain these questionnaires from applicable PPP borrowers and upload all responses and supporting documentation to the SBA PPP Forgiveness Platform within five business days of receipt. Lenders will further be required to separately input responses into the web form.
For more information concerning PPP loan forgiveness, contact the attorneys at Starfield & Smith, PC at 215.542.7070.