SBA Sending ‘Loan Necessity’ Questionnaires to PPP Borrowers
Paycheck Protection Program (PPP) borrowers should be on the lookout for a ‘loan necessity’ questionnaire from their lenders, as the Small Business Administration (SBA) is now requiring borrowers to provide new details to justify their use of PPP loan funds. The SBA has requested approval from the Office of Management and Budget to collect information via two versions of the questionnaire:
Borrowers with loans of more than $2 million should expect to receive the questionnaire from their lenders to gather information to “inform SBA’s review of your good-faith certification that economic uncertainty made your loan request necessary to support your ongoing operations.”
What information will I be required to submit?
The questionnaire is designed to assess a borrower’s business activity and liquidity and asks for specific answers and/or figures related to:
- Gross revenue and expenses for Q2 2020 vs. Q2 2019
- If the business was required to shut down or ‘significantly alter its operations’ at any time due to COVID-19
- If the business voluntarily shut down, reduced or altered its operations due to COVID-19 and why
- The amount spent on business alterations due to COVID-19 (whether due to voluntary or involuntary action)
- The amount of cash and “cash-equivalent” on hand at of the end of the last calendar quarter prior to applying for a PPP loan
- The amount of dividends or capital distributions paid to owners between March 13, 2020 and the end of the borrower’s covered period
- The amount of any prepayments of outstanding debt between March 13, 2020 and the end of the borrower’s covered period
- If any employees or owners were compensated above $250,000 on an annualized basis during the borrower’s covered period and, if so, the total amount
- Whether 20% or more of the business’ equity was owned by a public company on the date of the loan application
- Whether 20% or more of the business was owned by a private equity firm, venture capital fund or hedge fund on the date of the loan application
- If the borrower received funds from any other CARES Act relief programs and, if so, the type and amount
The above is not an exhaustive list; PPP borrowers should review the full questionnaire applicable to them for a complete understanding of required information.
Borrowers must complete and return the questionnaire to their lender within 10 days of receipt. Failure to comply could result in an ‘ineligible’ determination by the SBA which may result in a request for repayment by the SBA. We encourage borrowers to review the questionnaire and gather information as soon as possible to streamline the process.
How MFA Can Help
If you are in need of assistance with your required loan forgiveness calculations, please connect with our PPP Advisory Team to discuss how our team can assist. We also encourage you to stay up-to-date on insights and guidance related to PPP loan forgiveness by visiting MFA’s PPP Resource Center.
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