Borrowers of PPP Loans of $ 2 Million or More Must Justify the Necessity | Downs Rachlin Martin PLLC
Both for-profit and non-profit borrowers of PPP loans of $ 2 million or more are now required to submit additional forms.
On October 26, 2020, the ASB published a opinion seeking approval from the Office of Management and Budget (OMB) of new forms to be submitted by for-profit and non-profit borrowers of PPP loans of $ 2 million or more with their forgiveness requests. The two forms, Form 3509 Questionnaire on Need for Loan (For-Profit Borrowers) and Form 3510 Questionnaire on Need for Loan (Non-Profit Borrowers) are not yet available on the website. the SBA (as the OMB did not approve them), but drafts of the forms can be accessed here (Form 3509 and Form 3510). The form instructions state that the respective form must be completed and submitted to the PPP borrower’s lender within 10 business days of receipt by the lender. The form is required for all PPP borrowers borrowing funds of $ 2 million or more, even if they have already submitted their rebate request. Failure to complete the form could result in the SBA determining that a borrower was not eligible for the PPP loan, the amount borrowed, or any rebate amount claimed.
The forms contain questions about the impacts of COVID-19 on a Borrower’s activities, including whether it has been forced to close by a state or local authority, and if it has changed its activities due to COVID. -19. In addition, the form asks about the borrower’s liquidity position, including the cash position at the end of the fiscal quarter before the PPP application is filed, distributions / debt payments made during the period covered and employees whose compensation exceeded $ 250,000 on an annual basis.
These questions relate to issues that the requirements of the CARES Act do not cover. The CARES law only required that a borrower’s “economic uncertainty” made the loan necessary – there was no requirement that a business be actually affected by COVID-19. Also, note that the questionnaires cover questions about the borrower’s situation after receiving their loan – in other words, borrowers are asked to provide information that they did not know they had to provide when. they applied for the loan.