Opposition Grows to SBA’s PPP Loan Forgiveness Questionnaire

The Small Business Administration (SBA) recently released a questionnaire to use in its review of Paycheck Protection Program loan forgiveness applications of $2 million or more. There are concerns that certain aspects of the questionnaire could increase the risk of loan forgiveness being denied for nearly 30,000 Paycheck Protection Program (PPP) loans.

The questionnaire asks businesses to document how they fared during the pandemic and after the PPP loan application was completed, focusing on the second quarter of 2020. In the past month, the SBA issued guidance that requires lenders to send the questionnaire to small businesses that borrowed $2 million or more under the PPP.

One catch: The SBA is only giving borrowers 10 days to complete the questionnaire and provide the required documentation. Lenders only have 5 days to submit the documents to the SBA. This process is challenging for both lenders and borrowers who are grappling with a resurgence in COVID-19 and the limited manpower available to meet these tight timelines. Lenders should be contacting their PPP borrowers in advance to help them gather the information needed for the questionnaire.

Also troubling is that the questions focus on the good faith certification businesses had to make when applying for the PPP loans. In short, the SBA is requiring documentation that shows how the business fared during the pandemic, but after the PPP loan application was completed. Businesses that do not comply, or do not have documentation to satisfy the SBA request, could be ineligible to have their loans forgiven.

The SBA’s inquiry into a PPP borrower’s economic circumstance after receiving the PPP Loans is a new and surprising development. The forgiveness applications “will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form.” At the time of PPP application submissions, the scope of this review or the standards that would apply, were unknown. Borrowers simply had to certify to their uncertainty about the future. In fact, lenders were being criticized for not doing enough to get the funds to businesses in a timely manner. The SBA continues to change the criteria and requirements leaving the banks to scramble.

The Associated General Contractors of America (AGC) sent the SBA a cease-and-desist letter, requesting that “OMB immediately withdraw authorization of this unlawful collection of information; that SBA suspend its use of this form; and that SBA immediately inform all PPP loan recipients that they need not respond to this questionnaire until further public notice.”

Additionally, more than 80 groups representing small businesses and the lenders that provided PPP loans have signed a letter asking about the need for the questionnaires and the burden they would put on small businesses. The letter was signed by organizations such as the U.S. Chamber of Commerce, the American Bankers Association, the National Federation of Independent Business, the National Restaurant Association, the National Association of Home Builders and others.

The bottom line: Businesses who have a PPP loan of $2 million or more should start educating themselves on future developments regarding the SBA’s PPP loan forgiveness questionnaire. They should also start reviewing these questions and gather necessary documents. As it stands now, the questionnaire will be sent by PPP lenders to borrowers seeking forgiveness, and borrowers must return the completed form back to their lender within 10 days.