The popular Paycheck Protection Program (PPP) is back in the news again as the Small Business Administration (SBA) is seeking formal approval from the Office of Management and Budget (OMB) to collect loan necessity information. The questionnaires include SBA Form 3509 (nonprofit organizations) and 3510 (for businesses) are designed to obtain more detailed information about loan necessity from borrowers who received loans greater than $2M. The purpose of the new form is to conduct an expanded assessment of a borrower’s good faith certification. This is in support of the information outlined in the PPP FAQ #31 which addresses whether applicants owned by large companies with sufficient forms of liquidity qualify for a PPP loan. The SBA reaffirms the criteria that “current economy uncertainty makes this loan request necessary to support ongoing operations.” In other words, the SBA wants borrowers with large loans to demonstrate the financial need. To help clients, prospects, and others, Wilson Lewis has provided a summary of the questions asked below.
Business Activity Assessment
This section contains 8 total questions focused on the borrower’s business activities and impact due to the COVID-19 pandemic. The questions primarily focus on whether businesses were shut down or restricted to comply with government orders and the resulting financial impact.
- Question 1 – Requests the borrower’s gross revenue for the second calendar quarter of 2019 and 2020. For seasonal or new businesses specific time period information is given.
- Question 2 – Requests information on whether the borrower has been required to shut down to comply with state or local government regulations. Information about the shutdown dates and government agency issuing the order must be provided.
- Question 3 – Details on whether the borrower has been forced to significantly alter operations to comply with a COVID-19 government order is requested. There are several follow up questions designed to identify the timeframe and number of impacted locations.
- Question 4 – Requests information on whether the borrower has voluntarily ceased or reduced operations due to COVID-19. Specific details on why the decision was made are requested.
- Question 5 – This is similar to the previous question except it focuses on whether operations were voluntarily altered.
- Question 6 – Details on whether the borrower started any new capital improvement projects not due to COVID-19 are requested along with specific details.
- Question 7 – Asks for the borrower’s NAICS code.
- Question 8 – Permits the borrower to provide any additional comments about the information provided in this section.
Liquidity Assessment
This section contains 13 questions and focuses on the borrower’s liquidity and financial situation on the date of loan application among other things.
- Question 1 – Requests the amount of cash and cash equivalent on hand on the last day of the calendar quarter immediately before the PPP loan application was submitted.
- Question 2 – Inquires whether the borrower paid any dividends or other capital distributions between March 13, 2020, and the end of the forgiveness period. Note that pass-through estimated taxes should not be included.
- Question 3 – Requests information on whether the borrower has prepaid any outstanding debt between March 13, 2020, and the end of the covered period. If yes, borrowers are required to provide the total amount of all debt payments.
- Question 4 – Asks borrowers whether any employees were compensated an amount that exceeds $250,000 on an annual basis. If yes, the borrower must disclose the number of employees and the total compensation amount.
- Question 5 – This is similar to the previous question except it focuses on the borrower’s owners. IF yes, then the same details are also requested.
- Question 6 – Inquires whether on the date of the PPP loan application, if any of the borrower’s equity were listed on a national securities exchange. If yes, then the borrower must provide information on market capitalization on the date of application.
- Question 7 – Asks whether on the date of application if any publicly-traded company owned 20%, or more, of any class of the borrower’s outstanding equity securities. If yes, borrowers must disclose the name and market capitalization of the publicly-traded company on the date of application.
- Question 8 – If the answer to #6 was no, then the borrower needs to disclose the book value as of the last day of the calendar quarter, immediately before the date of loan application.
- Question 9 – Asks whether on the date of loan application if the borrower was a subsidiary of another company. If yes, the name, whether a U.S. or foreign company and whether equity shares of the parent company are listed on national exchanges must be disclosed.
- Question 10 – Requests information on whether 20% or more of any class of outstanding securities were owned by a private equity firm on the date of application.
- Question 11 – Asks whether on the date of application whether the borrower was an affiliate, or a subsidiary of a foreign state-owned enterprise, department agency or instrumentality of a foreign state. If yes, then additional details are requested.
- Question 12 – Requests to know whether the borrower received any funds from any CARES Act program, other than the PPP, excluding tax benefits. If yes, the borrower needs to disclose the total amount, name, and description of the program.
- Question 13 – Permits the borrower to provide any additional comments about the information provided in this section.
Filing Timeline
The completed form is due to the Lender servicing the PPP Loan within ten business days of receipt from the Lender. Within five business days after submission, supporting documents, signatures, and certifications, the lender is required to upload it to the SBA PPP Loan Forgiveness portal. Failure to complete the form and provide requested documentation means the SBA may determine a borrower was ineligible to receive the loan, the loan amount or any forgiveness amount requested. In addition, the SBA may require the full loan amount to be repaid.
Contact Us
The introduction of these questionnaires reflects the evolving nature of the PPP and how quickly the SBA can change things. There is now a 30-day comment period before the final forms will be issued. If you have questions about the information outlined above or need assistance with a PPP loan issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.