Thursday, January 14, 2021
Provisions of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) and guidance provided by the Small Business Administration’s (SBA) subsequently issued Interim Final Rule (IFR) on the Paycheck Protection Program (PPP) have clarified changes to the PPP and enhanced options for current PPP borrowers. In addition, on December 9, 2020, the SBA issued additional guidance (FAQ 53) associated with its review of loan forgiveness applications and, specifically, its new Loan Necessity Questionnaires for borrowers that received loans of more than $2 million.
Updates and Clarifications to the PPP for Current Borrowers
Clarification and Expansion of Eligible Expenses
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The Small Business Administration (SBA) announced in April 2020 that it will audit all loans of $2 million or more (including loans made to covered affiliates) at the time that loan forgiveness is sought, and other loans, as appropriate, will be reviewed for eligibility, fraud, abuse, and compliance with loan forgiveness requirements. SBA has now issued Loan Necessity Questionnaires (Questionnaires) through SBA Form
3510, applicable to for-profit and not-for-profit borrowers respectively, to facilitate the collection of supplemental information from borrowers to be used during the review process. These Questionnaires are distributed by the lender and must be returned within 10 business days of receipt.
New SBA FAQ Addresses Unease Surrounding PPP Loan Necessity Questionnaire
USA
December 16 2020
The Paycheck Protection Program (PPP) Loan Necessity Questionnaires are here to stay despite push back from borrowers and different trade groups on the questions being asked by the Small Business Administration (SBA). When the SBA released the Loan Necessity Questionnaire forms for PPP loans of more than $2 million, affected borrowers were understandably concerned that the SBA would penalize businesses who remained profitable and retained their employees during the pandemic the ostensible goal of the PPP. Rather than amending the questionnaire or suspending its use, the SBA issued FAQ #53 on December 9, 2020 to quell concerns raised by PPP lenders and borrowers.
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The U.S. Small Business Administration (SBA) has begun to issue loan necessity questionnaires to Payroll Protection Program (PPP) borrowers, adding clarity to the good faith certification they required with initial applications. The distribution of Loan Necessity Questionnaires (SBA Form 3509 or 3510) to lenders of loans of $2 million or more is the first step toward identifying loans that spur further audit or investigation.
As outlined in a previous legal alert, investigations of PPP recipients are increasing as reports of waste and abuse have captured the attention of government watchdogs and federal prosecutors. Authorities are targeting businesses that did not apply for loans in good faith or use the funds appropriately for payroll, utilities, rent, or other permitted expenses.