The Small Business Administration (“SBA”) recently released draft Paycheck Protection Program (“PPP”) necessity questionnaires for comment and review by the public. The draft questionnaire is a continuation of the SBA’s required good faith certification by borrowers that the “[c]urrent economic uncertainty makes [the PPP loan] request necessary to support the ongoing operations” of the applicant borrower’s business. The two questionnaires, SBA Form 3509 (for for-profit companies) and SBA Form 3510 (for non-profit organizations), state that they are meant for borrowers “that, together with [their] affiliates, received PPP loans with an original principal amount of $2 million or greater.” Previous SBA guidance advised that all borrowers receiving loans under $2 million were deemed to have made the economic uncertainty certification in good faith.
Lenders will be responsible for sending the appropriate questionnaire forms to borrowers and borrowers will then have ten business days from receipt of the document to complete and return it. According to the SBA, failure to return the completed questionnaire and associated documents “may result in a determination that [the borrower was] ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed.”
The draft questionnaires require certain financial and business activity assessments from both 2019 and 2020, including 2019 and 2020 Q2 revenue comparisons; calculations of cash on hand prior to applying for the loan; capital distributions or dividends paid; debt paid during the covered period of the PPP loan; highly compensated employee information; whether the company voluntarily or was forced to shut down operations as a result of the pandemic; and other applicable information regarding the borrower’s operations and financial situation. Six of the twenty-one questions also require supporting documentation to verify the provided answers.
Although it is unclear how the SBA will specifically use the requested information in their determinations for forgiveness, the content and structure of the questionnaires suggest that all borrowers should work closely with their attorneys and CPAs in order to ensure the answers and supporting documentation clearly articulate the borrower’s reasoning when applying for their PPP loan.
Further, despite the draft questionnaires having not been officially dispersed, the forms have been presented to the federal Office of Management and Budget for review and will likely be released at a future date following the open comment period expiring on November 25, 2020. Due to the short ten business day turnaround timeline, borrowers should begin initiating conversations with advisors and gathering supporting documentation now in order to prepare for a timely completion of the questionnaire when received.
Understanding PPP loan forgiveness requirements should remain a top priority both for current borrowers and businesses looking to participate in future extensions of the Paycheck Protection Program. Please contact your KDDK attorney or any member of the KDDK business law team for additional information and guidance on the CARES Act or any related matter.