12.21.20 | Client Alert
Previously released as a draft and the cause of some controversy, the Small Business Administration (SBA) has formally adopted and released Form 3509, which is a Paycheck Protection Program (PPP) loan necessity questionnaire for for-profit borrowers1. Form 3509 applies only to borrowers, who, together with affiliates, received PPP loans of $2 million or greater. The purpose of the form is to facilitate the collection of supplemental information so that SBA loan reviewers can evaluate the certification made on the PPP application that economic uncertainty made the loan request necessary. Along with the formal adoption of the Necessity Questionnaire, the SBA has added FAQ #532 to its PPP guidance, which provides background as to why the forms were created and clarifies that having to fill out the form does not necessarily result in the SBA further reviewing a loan.
Previously, the SBA announced that the economic uncertainty certification for all loans under $2 million, taking affiliates into consideration, will automatically be deemed to have been made in good faith.
Form 3509 would require borrowers to provide certain company information falling under two categories.
- A Business Activity Assessment, which asks for information such as a comparison of 2019 and 2020 Q2 revenues and any dates where the company was forced to, or voluntarily, shut down as a result of the pandemic.
- A Liquidity Assessment, which includes questions concerning the company’s cash on hand prior to taking the loan, whether the company made capital distributions and/or paid down debt during the PPP covered period and whether any employees were highly compensated during this time.
The form also provides the company with sections to explain any of their answers and to include any additional facts that it deems to be necessary.
The SBA is requiring lenders to provide this form to borrowers who then have ten business days to complete the form and return it to the lender with any required supporting documentation. Given the quick ten-day turnaround time, it would be prudent for PPP borrowers of these larger loans to start compiling information and backup.
1Form 3510 is the analogous non-profit form.
2See PPP FAQ page 19.
For more information on this topic or any other matter related to the COVID-19 pandemic, please contact your Berdon advisor and visit Berdon’s COVID-19 Information Center.
Berdon LLP New York Accountants