In late October, the Small Business Administration posted forms of Loan Necessity Questionnaires for lenders of Paycheck Protection Program loans to require from borrowers of more than $2 million. On December 9, 2020, an explanation for these questionnaires was provided through a new FAQ (Question 53) on the Treasury website.
The stated purpose is to help the SBA assess a borrower’s certification as to necessity for the PPP loan, although the questions do not seem to request much information on the consequences to the borrower if it did not receive a PPP loan (i.e., the necessity of the loan). The FAQ states that the SBA’s review is an assessment based on the totality of the circumstances and on the individual circumstances of the borrower. It provides some hope of a reasonable review by stating that the SBA is looking at the certification at the time of the PPP loan application, even if subsequent developments resulted in the loan “no longer” being necessary. But it also says that the SBA will look at a borrower’s actions both before and after the initial certification was made, without indicating how long after the certification; it is not precluded from inquiring about actions happening many months after the end of the borrower’s covered period.
A borrower has 10 business days to return the completed form to its lender, and the SBA may request additional information in its review, without a time limit but presumably within the 90 days for SBA decisions set forth in the May 2020 Interim Final Rule regarding loan forgiveness. The FAQ contemplates that such additional information will provide a borrower the opportunity to give a narrative response, presumably because all of the necessary financial information will have been submitted with the loan application. The questionnaire already provides a limited ability to provide such a narrative, so this additional narrative would be in response to specific questions from the SBA.