The Small Business Administration (“SBA”) will require lenders to issue Loan Necessity Questionnaires to borrowers to collect information for the agency’s review of large Paycheck Protection Program (“PPP”) loans. Each PPP borrower with a loan of $2 million or more (together with its affiliates as determined under the applicable SBA affiliation rules) must complete this new questionnaire. The forms are available here: SBA Form 3509 and SBA Form 3510. Borrowers are required to complete and submit the questionnaires, along with supporting documents, within ten business days of receiving the forms from their lenders. Failure to complete the form may result in a determination of ineligibility, a request for repayment, or other remedies.
The stated purpose of the questionnaire is to collect “supplemental information” that will be used by SBA loan reviewers to evaluate a PPP borrower’s original certification of economic necessity. When borrowers applied for PPP loans many months ago, they were required to make several certifications, including: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Though there appears to be no basis for reevaluating borrowers’ necessity certifications months later, post hoc reassessments of necessity could prove problematic for borrowers that fared better than expected during the pandemic.
Information Sought. The questionnaire seeks 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. Much of this information is requested for the borrower’s covered period – the period after the PPP loan was disbursed.
Confidentiality. The questionnaire allows a borrower to indicate whether its answers and the information provided are confidential. Because the SBA has been unpredictable in its approach to releasing information on PPP loans, however, borrowers should take additional precautions. In July, the agency released detailed information on PPP borrowers with loans of $150,000 or more, just weeks after Treasury Secretary Mnuchin announced such information would not be released. To increase the likelihood that SBA will not release sensitive business information, borrowers should insert confidentiality markings on any confidential documents submitted, as well as indicating confidentiality on the questionnaire itself.
Another Certification. An authorized representative of the borrower is required to certify that “the information provided in this questionnaire and in all supporting documentation is true and correct in all material respects” and that the certification is made “after reasonable inquiry of people, systems, and other information available to the Borrower.”
Ten-Day Turnaround. To meet the tight timeline, any PPP borrower with a loan of $2 million or more should review the questionnaire and begin to gather the relevant information before receiving the questionnaire from their lenders.
