Promissory Notes - Banking & Finance Insights, Issue 6

Welcome to our sixth issue of Promissory Notes -- our e-newsletter focused on banking and finance insights.

SBA to Drop Its Review of PPP Loans of $2 Million and Above -

"The effort marks an about-face for the agency that landed in hot water after allowing publicly traded companies to access the program intended for small businesses."

Why this is important: The U.S. Small Business Administration (SBA) announced on July 9th that it has discontinued use of its necessity questionnaires (Form 3509 for for-profit businesses and Form 3510 for non-profit businesses) for Paycheck Protection Program (PPP) loans of $2 million or more. In October 2020, the agency began asking PPP lenders to provide the forms to its for-profit and non-profit PPP borrowers that had PPP loans in excess of $2 million, to be completed as part of the loan forgiveness process. The SBA developed the questionnaire as a means of discouraging companies that did not need emergency PPP funds, such as publicly traded companies that had access to other forms of capital, from using the forgivable loan program. The questionnaire sought information about revenues, effects of shutdown and other pandemic-related orders, disruptions in operations and supply chains, capital improvement projects, liquidity, dividends, market capitalization, debt, owner compensation and parent companies, and was described by many as being time-consuming and burdensome, as well as problematic because the information sought was based on the current period and not as of the time when the PPP loan was sought. At least one lawsuit was filed challenging the questionnaire. Recognizing that the necessity reviews were causing delays in approving forgiveness applications and acknowledging that the questionnaire was no longer serving its intended purpose -- to deter companies that had access to alternate forms of capital from applying for PPP loans (the application period ended on May 31, 2021) -- the SBA agreed to withdraw use of the questionnaires to reduce the burden on PPP borrowers with loans of $2 million and greater.