Borrowers, together with their affiliates, who have loans over $2 million may be required to provide additional information to support the certifications made on their Paycheck Protection Program (PPP) loan application via two new SBA questionnaires.
When applying for the PPP loan, borrowers certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The certification drew attention in May when some borrowers were alleged to have taken loans without it being “necessary,” and some large companies returned borrowed funds. The SBA also released an FAQ indicating that “to further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans over $2 million, in addition to other loans as appropriate.” While subsequent guidance indicated the SBA could review the borrower’s eligibility, including for this certification, no guidance has been provided to indicate how the SBA would evaluate how borrowers determined they had the need required to make this certification.
Now, SBA Form 3509 and SBA Form 3510 have begun circulating (although they have not been released directly by the SBA or Treasury). Instructions on the forms indicate that borrowers and their affiliates (per SBA affiliation rules) that received loans over $2 million would be required to complete and submit both forms, which address the borrowers’ business activities and liquidity. Accordingly, lenders would request the forms from borrowers, and borrowers would be required to complete them within 10 days of lenders’ requests.
These forms, or questionnaires, have not been confirmed as official by the SBA or Department of the Treasury, and no corresponding guidance has been issued. However, borrowers with loans greater than $2 million should review the forms with the understanding that they are likely to be used by the SBA to confirm eligibility. Borrowers concerned about their eligibility should contact their legal counsel.
If you have questions about your PPP loan, forgiveness, or the Loan Necessity questionnaires, please contact your HBK Advisor.