On October 26, 2020, the Small Business Administration (“SBA”) issued a notice stating that it intends to release two new forms, one for for-profit businesses and the other for non-profit, relating to the PPP forgiveness process for borrowers with loans of $2 million or more. This includes those companies that have $2 million or more together with their affiliates.  Although the forms have not been released to the general public on the SBA website, they have been shared with lenders and various trade organizations. The SBA states that the purpose of the form is to “facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the good-faith certification that you made on your PPP Borrower Application that economic uncertainty made the loan request necessary.”

The SBA states further that the forms are part of their attempt to “maximize program integrity and protect taxpayer resources.”  The information collected will be used to inform the SBA of the uncertainty that made your loan request necessary and does not mean that the SBA is challenging the borrowers’ certification.  They have indicated that they will make a determination based on the totality of the borrowers’ circumstances. 

The forms request general information about two key assessments – one relating to the borrower’s business activity, and another relating to the borrower’s liquidity. We have included a link for you to download a copy of Form 3509, PPP Loan Necessity Questionnaire (For-Profit Borrowers).  Click here.

Here are a few of the questions that stand out from the form:

1.  Provide gross revenues for Q2 2020 and Q2 2019

2.  Were you ordered to shut down due to a local or federal mandate?

3.  Did you have any capital improvements from March 13 through the end of the covered period?

4.  Did you make any distributions from March 13 through the end of the covered period?

5.  Provide the total cash/liquidity for the quarter that ended prior to your PPP Loan application (most likely end of Q1 2020)                        

The form also includes areas for additional comments at the end of the Business Activity and Liquidity sections. These allow for a 1000 word explanation on any of the questions answered. It will be of the utmost importance to fill these areas out carefully and make every word count. You can explain your position and reasoning for taking the loan. For example, for an ESOP company that has substantial liquidity, it will be important they explain their off-balance-sheet repurchase obligation that requires the need to maintain cash. We highly recommend you seek assistance from your attorney as you prepare your responses to these free-response questions.

The instructions to the forms indicate that the borrowers are required to provide responses within ten days of receiving the relevant form from their lender.  Given this relatively short timeframe to reply, we recommend borrowers with aggregated loans of $2 million or more start gathering the information required by these forms so they are prepared to respond timely when they receive the official request. Failure to respond timely to the lender or SBA can and will come with consequences.

If your loan was for less than $2M, this will not be a required form. However, we highly suggest you look over the form since the SBA will most likely be leveraging the use of this form if your loan is selected for audit.

This form may bring an avalanche of questions for you. Two of the biggest questions being: Should I wait to apply until more information is released? Should I use 8 weeks or 24 weeks as my covered period? Every company is different and the answers to those questions depend on the facts and circumstances.  We will gladly discuss these key areas with you and help you evaluate the implications.