SBA Issues PPP Loan Necessity Questionnaires
Last week the Small Business Administration (the “SBA”) announced that every borrower or group of affiliates with Paycheck Protection Program (“PPP”) loans in excess of $2,000,000 in the aggregate will be required to fill out a Loan Necessity Questionnaire.
The questionnaires, which are being distributed by lenders to applicable borrowers, must be completed and returned to the lender servicing the PPP loan within 10 business days after receipt. The form provides 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.” Note that receipt by a borrower of this form does not automatically mean that the SBA is challenging the borrower’s loan.
The questionnaires require the borrower to answer certain questions regarding the ways in which the borrower’s operations were impacted by COVID-19, the year-over-year changes in Q2 revenue, whether the borrower began new capital improvement projects during the covered period, the borrower’s total cash on hand, the compensation of highly-compensated employees and owners and certain other information related to the operations and liquidity of the borrower. The borrower has the option of marking information provided in connection with the questionnaire as confidential, but even if a question is marked as confidential, the borrower is still required to respond to the question and provide all necessary information.
It is important that borrowers provide truthful responses to the questionnaires. The authorized representative who executes the questionnaire is required to personally certify that the information provided in the questionnaire is true and correct in all material respects. Additionally, the questionnaire cautions that knowingly making a false statement to obtain an SBA loan is potentially punishable by criminal penalty.
Please note that the questionnaires permit borrowers to provide additional information to supplement the borrower’s responses. Borrowers are advised to exercise extreme caution when preparing these supplemental responses. Borrowers are also strongly encouraged to consult with counsel prior to submitting these questionnaires.
Koley Jessen will continue to monitor for additional guidance from the SBA and provide any updates as necessary.