SBA publishes loan necessity questionnaire for PPP borrowers

At least some recipients of loans through the Paycheck Protection Program will receive new loan necessity questionnaires from the Small Business Administration.

The SBA announced last week that Forms 3509 (Loan Necessity Questionnaire for For-Profit Borrowers) and 3510 (Loan Necessity Questionnaire for Non-Profit Borrowers) have been issued to borrowers in an attempt to confirm the economic necessity that borrowers made when applying for the PPP loan program. The forms were published in the Federal Register but as of this writing have not been published on the SBA’s website.

Borrowers with PPP loans of $2 million or more have begun to receive the questionnaires. The SBA has not indicated whether all borrowers will receive the questionnaire; those who do receive it are required to complete and return it within 10 business days.

Example requests as part of the questionnaire include:

  • the cash and cash equivalents the borrower had on hand as of the last day of the calendar quarter immediately before the date of the PPP application
  • whether the borrower has made any dividends or capital distributions (other than for pass-through estimated tax payments)
  • whether the PPP borrower has prepaid any outstanding debt during the covered loan forgiveness period

In addition, the form asks about highly compensated individuals, whether any of the borrower’s equity securities were listed on a national exchange, and if not listed on a national exchange, the book value of equity and whether 20% or more of the borrower was owned by a private equity firm, venture capital firm, or hedge fund.

The loan necessity questionnaire also includes a business activity assessment. In that section, the SBA requests information with respect to a borrower’s gross receipts and if the entity has been required to shut down as a result of COVID-19. It also asks if business operations have been affected and whether the borrower has undertaken any capital improvements not due to COVID-19.

It isn’t clear whether it is the responsibility of the lender or the SBA to send the questionnaires to borrowers, nor is it clear when borrowers must complete a questionnaire in relation to completing its loan forgiveness application.

PPP regulations continue to evolve, so reach out to a KraftCPAs advisor for the latest changes that could affect your situation.

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