After the onset of the pandemic and the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the U.S. Small Business Administration and the U.S. Department of Treasury issued federally secured Paycheck Protection Program (PPP) loans. These loans were created to shield the small businesses of the nation from the economic fallout of stay at home orders, closed businesses, and economic decline.
It’s through just the first round of PPP loans, designed for businesses comprised of 500 employees or less, that the PPP loan program benefited 30 million employees, or about 50 percent of the private workforce.
Now, the Small Business Administration (SBA) is requiring PPP lenders to issue loan necessity questionnaires to all borrowers of PPP loans of $2 million or more. What does this mean for businesses? This article will examine what this loan necessity questionnaire entails.
The Loan Necessity Questionnaire
On October 26, 2020, the SBA published a notice which announces that they are seeking comment on the Federal Register for both for-profit and nonprofit borrowers, evaluating the necessity of PPP loans of $2 million or more.
This questionnaire is seeking to “facilitate the collection of supplemental information” to inform the SBA of the good-faith certification for every PPP borrower’s loan request; to deem whether the loan was necessary to support ongoing operations.
Since the introduction of the CARES Act and PPP loans, borrowers of loans exceeding $2 million were made aware that their loans would be subject to review. These newly-released questionnaires require extensive information and aren’t necessarily limited to information about the borrower’s circumstances at the time they applied for the loan.
This is a fairly major development, and if you’ve received one of these forms, it’s critical that you complete and return the form in a timely manner.
Your Timeline for Completing Your Questionnaire
If you have received a PPP loan of $2 million or more and have received a Loan Necessity Questionnaire, what does this mean? What should you know about completing and submitting this form?
Your form must be submitted to your lender, completed in full, within 10 days of receiving it. Instructions on these new forms are quick to warn borrowers of more than $2 million in PPP loans about their compliance with these requests, and that:
"failure to complete the form and provide the required supporting documents may result in SBA's determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and SBA may seek repayment of the loan or pursue other available remedies."
This means that by not submitting your completed loan necessity questionnaire, you risk losing your status to receive loan forgiveness from the federal government, and may have to repay the loan yourself.
Within five business days of receiving your completed form, supporting documents, signatures, and certifications, your lender must upload the form and all included documents to the SBA PPP Forgiveness program and input your responses into the SBA’s web form.
What Will Appear on the Questionnaire
There are two types of forms: one for for-profit businesses and another for non-profit businesses.
- You can find a copy of the Loan Necessity Questionnaire for for-profit borrowers here.
- You can find a copy of the Loan Necessity Questionnaire for non-profit borrowers here.
Each form is nine pages in length, with 21 questions each. Some of these questions have multiple components, and supporting documentation is requested in six of these questions. The Journal of Accountancy states that this is likely only one component of the SBA’s review of your loan, so while they may seem fairly cut-and-dry, there will be additional opportunities to provide additional context at a later date.
If you’ve received a PPP loan of $2 million or more and you haven’t yet received a Loan Necessity Questionnaire, you will soon. It requires your prompt attention and accurate reporting to retain your loan’s status and avoid repayment. The stakes may seem high, but with careful consideration and complete attention to detail, you can verify your company’s need for a PPP loan and protect your loan’s eligibility for forgiveness.