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SBA Removes PPP Loan Questionnaire

Friday, July 16, 2021

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The U.S. Small Business Administration has reportedly informed lenders that it is eliminating the Loan Necessity Questionnaire for Paycheck Protection Program loans of $2 million or greater.

According to the Journal of Accountancy, a notice was sent July 9 in which the SBA said that it will no longer request either version of the Loan Necessity Questionnaire: SBA Form 3509 for for-profit borrowers and SBA Form 3510 for not-for-profit borrowers.

The notice also declared that any questionnaires previously requested are no longer required and that any loans with an open request for additional information should be closed and resubmitted.

While these changes went into effect immediately, the SBA reportedly said that it would release an FAQ shortly with more details.

Questionnaire History

In December, the Associated General Contractors of America filed a lawsuit against the SBA and the Office of Management and Budget with the intent to block the questionnaire.

JTSorrell / Getty Images

The U.S. Small Business Administration has reportedly informed lenders that it is eliminating the Loan Necessity Questionnaire for Paycheck Protection Program loans of $2 million or greater.

In addition to suggesting that the questionnaire is unlawful to begin with, the AGC also asked for the courts to restrict the use of the information that the questionnaire generated until the SBA made it available to the public and published revisions.

The suit was filed Dec. 8 in the United States District Court for the District of Columbia.

“The administration has every right, and obligation, to ensure businesses were eligible to apply for and receive the relief loans,” Stephen E. Sandherr, the association’s Chief Executive Officer, said at the time. “But they do not have the right to use a secretly crafted form to gather unprecedented amounts of proprietary information that has little or nothing to do with the economic uncertainty that led businesses to apply for the loans in the first place.”

In the complaint, the AGC charged that the way the form was created violates the Paperwork Reduction Act and the Administrative Procedures Act. The AGC said that it was “requesting the court to declare that the questionnaire is arbitrary and capricious, and to declare that the SBA cannot lawfully use the information that the form generates to find a company ineligible for a PPP loan or deny a company’s application for forgiveness of its loan.”

AGC also said that the two agencies disregarded the legally mandated process for developing such a questionnaire, mainly that it wasn’t released for a 60-day public comment period and that the two arbitrarily put an emergency label on the survey to bypass the collection process.

The association also noted that the CARES Act (which established the PPP program) only required loan applicants to make a “good faith certification that the uncertainty of current economic conditions makes necessary the loan request….”

The form attempts to set a means test, a revenue reduction test and a liquidity test that Congress never contemplated, and it focuses on later events that few companies could have predicted when applying, according to AGC.

“Resorting to a secret form that disregards Congressional intent and retroactively changes the criteria for a loan is not due diligence; it is unlawful and needs to stop before employers are irrevocably harmed,” Sandherr added.

Other AGC Actions

The AGC has been a vocal critic of the SBA and PPP process since its inception. Most recently, the association filed a Freedom of Information Act request against the SBA to disclose more information about how its fielding PPP forgiveness applications of $2 million or more.

According to the AGC, the process is taking up to eight months.

“The process continues to be very opaque,” said Michael Kennedy, AGC's general counsel. “As time has gone by and the delay has increased, we've become increasingly concerned about what those standards and procedures may be.”

While forgiveness applications for businesses who received loans below the $2 million threshold are only taking weeks, businesses with larger loans are having a much longer response time.

“It's been a hidden secret as to what exactly they're looking at from a metrics or supporting information perspective,” said James Miller, a partner in the construction practice at accountancy Marcum LLP. Miller added that while he can’t say the same for everyone, in his experience, only one of hundreds of clients has successfully gotten their application through the process and was reported to be approved.

And, early in the process in April 2020, the U.S. Treasury Department released a clarification on the program just days after AGC wrote a letter noting that the loan guidance had appeared to exclude many construction firms.

The Administration released an interim final rule on April 2 for the PPP, that stated that to qualify, businesses must have 500 or fewer employees and fall below the agency’s small business size standards to qualify.

The standard in question revolves around small size standards (as defined in section 3 of the Small Business Act, 15 U.S.C. 632). For construction businesses, this is generally determined by an average annual income threshold, not a number of employees threshold.

The AGC responded with the initial guidelines on April 5, with Stephen E. Sandherr, the association’s Chief Executive Officer saying at the time:

“This error appears to severely undermine the purpose of the new loan program by endangering the survival of many construction firms—the vast majority of which are family-owned businesses—that Congress intended to qualify for the program. As a result, tens of thousands of construction professionals will be forced to suffer new economic hardships because agency officials are misstating the law and subsequent eligibility guidance from the U.S. Department of the Treasury.”

On April 8, the Treasury issued a clarification in the form of a Q&A. The items listed included:

  • Question: Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?
  • Answer: No. In addition to small business concerns, a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates (if applicable).


Tagged categories: Associated General Contractors (AGC); COVID-19; Good Technical Practice; Government; NA; North America; Small Business Administration

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