On December 9, 2020, the Small Business Administration (SBA) released Paycheck Protection (PPP) Loan FAQ 53, which answers the question “Why are some PPP borrowers receiving a Loan Necessity Questionnaire?” As a reminder, FAQ 46 clarified that any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million would be deemed to have made the required certification concerning the necessity of the loan request in good faith.
FAQ 53 notes that the SBA’s assessment of a borrower’s certification will be based on the totality of the borrower’s circumstances utilizing a multi-factor analysis. The SBA will assess whether the borrower had an adequate basis for making the required good-faith certification.
Even though borrowers were required to make this certification in good faith at the loan application time, subsequent developments may have resulted in the loan no longer be necessary. Accordingly, the SBA may consider the borrower’s circumstances and actions both before and after the borrower’s certification to determine whether the borrower made the certification in good faith at the time of its loan application.
After a borrower submits their completed questionnaire, the SBA may request additional information. When additional information is requested, borrowers will have an opportunity to provide a narrative response to the SBA explaining the circumstances that provided the basis for their good-faith loan necessity certification. The SBA noted that this targeted, multi-step approach will ensure the integrity of the evaluation process, as well as properly allocate their resources to those loans that require additional review.
The loan necessity questionnaire used by for-profit borrowers can be found here.
Borrowers should review the questionnaire when preparing to apply for loan forgiveness. The SBA will rely on the completed questionnaires, narratives, or other requested information when evaluating a borrower’s “need.”
The opportunity for borrowers to provide a narrative regarding the economic uncertainty at the time of their “need” certification is a welcomed shift. These requests from the SBA better align with the intent of the PPP while reiterating the necessity for properly documenting the economic factors borrowers were facing at the time of application.
Please contact your BKM Sowan Horan team member if you require assistance with your loan forgiveness application or have any questions.