SBA begins issuing loan necessity questionnaires for both non-profit and for-profit PPP Borrowers
The Small Business Administration (SBA) has begun issuing certified loan necessity questionnaires to Paycheck Protection Program (PPP) Borrowers with loans of $2 million or greater. The SBA has developed two distinct versions of the loan necessity questionnaire: one for for-profit Borrowers, and one for non-profit Borrowers. The SBA has indicated that it will use the questionnaires to evaluate the good-faith certification that was made on the PPP Borrowers’ application that economic uncertainty made the loan request necessary. The questionnaires also reflect SBA’s effort to maximize program integrity and protect taxpayer resources. (Please note that these are draft forms awaiting approval from OMB.)
While the questionnaire clearly states “the receipt of this form does not mean that SBA is challenging that certification,” the SBA also points out that Borrowers should note that failure to complete the form and provide the required supporting documents may result in SBA’s determination that an organization is 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. The questionnaire is broken down into two sections: Business Activity and Liquidity Assessments. Borrowers are to answer specific questions as well as provide an optional section for a borrower to provide additional comments for each assessment.
Business Activity (period March 13, 2020 through the end of the loan forgiveness covered period)
1. Gross Revenue
2. Mandated shut downs or orders to significantly alter a business’s operations including:
- Specifics on how the operations were altered
- Cash outlays required to adhere to the orders
- Borrowers voluntarily cease, reducing or altering operations
3. Capital improvement projects
1. Amount of cash and cash equivalents as of the last day of the calendar quarter immediately following Borrower’s PPP loan application
2. Dividends or other capital distributions (other than for pass-through estimated tax payments) to its owners during the period March 13, 2020 and the end of the loan forgiveness covered period
3. Prepayment of any outstanding debt during the period March 13, 2020 and the end of the loan forgiveness covered period
4. Employee or Owners compensation in an amount that exceeds $250,000 on an annualized basis during the loan forgiveness covered period
5. Are the borrower’s equity securities listed on a national securities exchange?
6. Did any publicly traded company owned 20% or more of any class of Borrower’s outstanding equity securities?
7. On the date of Borrower’s PPP loan application, was the Borrower a subsidiary of another company? (including information about the Borrower’s parent company)
8. On the date of Borrower’s PPP loan application, was 20% or more of any class of Borrower’s outstanding equity securities owned by a a private equity firm, venture capital firm or hedge fund?
9. On the date of Borrower’s PPP loan application, was Borrower an affiliate or a subsidiary ( at least 50% of Borrower’s common equity or equivalent equity interest, directly or indirectly owned or controlled by) of a foreign, state-owned enterprise or of a department, agency, or instrumentality of a foreign state?
10. Receipt of any funds from any CARES Act program other than PPP, excluding tax benefits
Finally, the SBA states that within five business days after the Borrower provides a complete form with all required responses, supporting documents, and signatures and certifications, the Lender servicing the loan is required to upload the form and documents to the SBA PPP Forgiveness Platform and separately input the Borrower’s responses to each question into the web form available in the platform.
Please note that these are draft forms awaiting approval from OMB.
- Not-for-Profit & Education
- SBA Disaster Loan Assistance
- Paycheck Protection Program (PPP) Loan Forgiveness Assistance
- PPP Loan Forgiveness Solutions for Lenders
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