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    PPP Updates Trigger Concern Over Loan Necessity Questionnaires

    More guidance has been released for employers that received Paycheck Protection Program (PPP) loans relating to the Small Business Administration (SBA) “loan necessity” questionnaires. The loan necessity questionnaire is being criticized as going beyond the original requirements of the PPP program.

    Loan Necessity

    The SBA has posted a controversial questionnaire for the collection of supplemental information that will be used by loan reviewers in evaluating the good-faith certification borrowers made when requesting PPP loans of $2 million or more. The certification required was that economic uncertainty made the loan request necessary to support a business’s ongoing operations. However, the new questions SBA is asking appear to be broader.

    The American Bankers Association and others have questioned some information the forms are asking for, such as quarterly revenue, employee earnings, and information outside of the time period of the operations that initially supported the loan request. The group noted that this information is unrelated to what borrowers were asked to consider when they initially applied for their PPP loan. The industry group is concerned that this information will be used to disqualify borrowers from loan forgiveness and may be used to look into the personal finances of small business owners. These points also were included in a letter to Congress from the lenders’ groups and many other trade associations.

    Borrowers must submit the questionnaire, along with the required supporting documents, to the lender servicing a borrower’s PPP loan. Within five business days after a borrower provides the form including all required responses, supporting documents, signatures and certifications, the lender is required to upload the form and documents to the SBA PPP Forgiveness Platform. The lender must also separately input the responses to each question into the web form. The bankers’ group noted that the whole process is burdensome to lenders and borrowers and could expose lenders to liability if they make procedural errors.

    One group, the Associated Contractors of America, have filed a lawsuit in the federal District Court for the District of Columbia to enjoin the SBA from basing its decisions on the questionnaire. In a news release, Stephen E. Sandherr, the association’s chief executive officer, states…”they [SBA] do not have the right to use a secretly crafted form to gather unprecedented amounts of proprietary information that has little or nothing to do with the economic uncertainty that led businesses to apply for the loans in the first place.”

    It is unclear at this point how the questionnaire issue will be resolved. Until it is, PPP borrowers must meticulously gather the required information, submit it to the lender in a timely manner, and carefully follow these procedures through to the end. Your Frazier & Deeter advisor can help you through this process.

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