Paycheck Protection Program (“PPP”) – Update November 2, 2020

By Alan R. Sasserath, CPA, MS

Several months have passed since a constant stream of critical PPP updates dominated our days. However, we are writing now because last week the Small Business Administration (“SBA”) released a notice that it will seek to obtain certain information from PPP loan borrowers whose PPP loan exceeds $2 million.

The SBA will seek to obtain such information via two new forms:

  1. Form 3509 – Loan Necessity Questionnaire (For-Profit Borrowers)
  2. Form 3510 – Loan Necessity Questionnaire (Non-Profit Borrowers)

Proposed versions of the forms are attached, and the public has until November 25, 2020 to submit comments regarding the content of such forms before they are finalized.

This request relates to the certification made by every company that applied to the PPP that stated, “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” (the “Certification”).  This Certification has been the topic of many discussions.

Forms 3509 and 3510 also appear to be in response to the SBA’s PPP Loan FAQ #31 and FAQ #46.  These questions relate to the Certification and whether businesses owned by large companies have adequate sources of liquidity to support the business’s ongoing operations.

How will these forms affect other borrowers – those with PPP Loans of less than $2 million?  Pursuant to FAQ #46, “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”  Based on this, it appears that the forms may act as a helpful guide to such borrowers that may have questions regarding loan necessity, but (we hope) nothing more.

The forms include questions related to what the SBA refers to as a Business Activity Assessment and a Liquidity Assessment (“Assessments”).  Attached are copies of the FAQs referred to above.

One of the key points that we saw regarding such Assessments is that the Certification was required to be made at the time of the application and not at any point after that date.  The Assessments ask questions relating to financial activity occurring up through the end of the loan forgiveness covered period (the 24-week period after the date of the loan).

Based on the instructions, the completion of either form is required by every borrower that, together with its affiliates, received PPP loans with an original principal amount of $2 million or greater.  The completed form is due to the lender servicing the PPP loan within ten business days of receipt from the lender.

Since the Forms are not yet finalized, we believe that those with PPP loans of $2 million or more should at a minimum start formulating how they would respond to such a request.  For all recipients of PPP loans, we suggest that you document why you believe that you were able to make the Certification if ever asked for such information.

As always, we are available to help. Please contact us at 631-368-3110.