SBA Requests Questionnaire to Assess Borrower’s Certificates of Necessity for Paycheck Protection Program Loans Over $ 2 Million | Vinson & Elkins LLP
The Small Business Administration (“SBA”) will require lenders to issue loan necessity questionnaires to borrowers in order to collect information for the agency’s review of large loans from the Paycheck Protection Program (” PPP ”). Each PPP borrower with a loan of $ 2 million or more (as well as its affiliates as determined under the applicable SBA membership 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 questionnaires, along with supporting documentation, 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 reimbursement or other remedies.
The stated purpose of the questionnaire is to collect “additional information” that will be used by SBA loan assessors to assess the initial certification of economic necessity of a PPP borrower. When borrowers applied for PPP loans several months ago, they had to make several certifications, including: “The current economic uncertainty makes this loan application necessary to support the applicant’s ongoing operations.” Although there appears to be no basis for reassessing borrowers’ certificates of necessity months later, post-hoc necessity reassessments could prove problematic for borrowers who have fared better than expected during the pandemic.
Information sought. The questionnaire seeks information on revenue, effects of the shutdown and other pandemic-related orders, operational and supply chain disruptions, capital improvement projects, liquidity, dividends, market capitalization, debt, compensation of owners and parent companies. Most of this information is requested for the period covered by the borrower – the period after the PPP loan has been disbursed.
Confidentiality. The questionnaire allows a borrower to indicate whether their answers and the information provided are confidential. Since the SBA has been unpredictable in its approach to publishing information on PPP loans, borrowers should take additional precautions, however. In July, the agency released detailed information on PPP borrowers with loans of $ 150,000 or more, just weeks after Treasury Secretary Mnuchin announced that information would not be released. To increase the likelihood that SBA will not disclose sensitive business information, borrowers should insert confidentiality marks on all confidential documents submitted, as well as indicate 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 documents is true and correct in all material respects” and that the certification is carried out “after reasonable investigation of persons, systems and other information. available to the Borrower.
Ten day delay. To meet the tight deadline, any PPP borrower with a loan of $ 2 million or more should review the questionnaire and start collecting relevant information before receiving the questionnaire from their lenders.