Small Business Administration Releases New Loan Remission Review FAQs
Alerts and Updates
As part of the loan forgiveness application process, the SBA reviews all loans of $ 2 million or more.
On December 9, 2020, the Small Business Administration (SBA) added question 53 to its Frequently Asked Questions (FAQ) document. The new question provides a more detailed look at the SBA Paycheck Protection Program (PPP) loan cancellation review process, especially for borrowers with PPP loans of at least $ 2 million. dollars and the new 3509 and 3510 forms, and expands on the good faith certification discussed in question 46.. This Alert summarizes the key points of the FAQ update.
The key points for PPP loan borrowers are:
- As part of the loan forgiveness application process, the SBA reviews all loans of $ 2 million or more. As part of this process, these borrowers will be required to complete a Loan Necessity Questionnaire on SBA Form 3509 or 3510. This information will help the SBA assess a borrower’s certification in their initial PPP loan application that “[c]The current economic uncertainty makes this loan application necessary to support the applicant’s ongoing operations.
- A request from the SBA to complete the Loan Necessity Questionnaire does not necessarily mean that the SBA is challenging a borrower’s economic uncertainty certification. Rather, the SBA’s assessment of a borrower’s certification will be based on many factors and in the general context of the borrower’s situation at the time of the loan application (as described in more detail below. ).
- Recommendation: Borrowers who need to complete the Loan Needs Questionnaire should provide detailed information about their business operations. If a borrower with a loan of $ 2 million or more has not submitted their loan forgiveness request, it is recommended that you have the necessary information to complete the Loan Necessity Questionnaire before filing the loan forgiveness request. ready. This will alleviate any delay in meeting the 10-day filing deadline, which will likely have negative consequences if not met. It is also advisable to consult a lawyer and other advisers in preparing the response to the Questionnaire on the need for a loan.
Questionnaire on the need for a loan
As discussed in a precedent Alert, borrowers of PPP loans of $ 2 million or more will be subject to SBA reviews for eligibility, fraud or abuse, and compliance with loan cancellation requirements. As part of this process, the SBA issues PPP lenders with loan necessity questionnaires (Forms 3509 and 3510) to be provided to borrowers who have received loans of $ 2 million or more. Borrowers who receive the questionnaires must return the completed questionnaires to their lenders within 10 business days of receipt. There has been no indication from the SBA as to whether the review of loan necessity questionnaires will affect the 90-day statutory review period for the SBA to review a loan forgiveness request.
SBA assessment of borrower certification
The SBA has stated that a request to complete the Loan Necessity Questionnaire does not mean that the SBA is challenging a borrower’s certification made on their initial PPP loan certification. When evaluating a borrower’s certification, the SBA will determine whether a borrower had an adequate basis for establishing good faith certification, based on the borrower’s situation in light of the language of the borrower. certification and SBA guidelines. The certification on the initial loan application must have been made in good faith at the time of the loan application, even if subsequent events made the loan no longer necessary. The SBA may consider the borrower’s situation and actions before and after certification to determine whether the borrower performed the certification in good faith.
Once a borrower has submitted the questionnaire, the SBA may request additional information. In response, the borrower will have the opportunity to provide a narrative response explaining the basis for certifying the need for a PPP loan. The SBA will then make a final decision as to whether the borrower had an adequate basis for certifying the necessity of the loan after considering any additional information that the borrower chooses to submit.