Attention Paycheck Protection Program (PPP) recipients…the Small Business Administration has dropped the loan necessity review for PPP loans of $2 million or greater. Here are the details.

What is the loan necessity review?

Back in November 2020, the SBA released a loan necessity questionnaire as part of its review process for loans exceeding $2 million. The form was used to gather supplemental information to ensure that borrowers of loans totaling $2 million or more needed the loans due to economic uncertainty.

Borrowers of smaller amounts were not subject to this questionnaire and in some cases simply have to self-certify that there was an economic need for the funds.

The loan necessity questionnaire is form 3509 for for-profit borrowers and Form 3510 for nonprofit borrowers.

SBA drops requirement

Earlier this month, the SBA sent a notice saying it would no longer request either version of the loan necessity questionnaire. Additionally, loan necessity questionnaires previously requested no longer need to be submitted.

What is the purpose of the change?

The two forms were met with much disapproval from businesses, due to the burdensome nature of the forms and the legality of some of the questions. The form requests a plethora of supplemental financial information including gross revenue, capital on hand, a list of highly paid executives, along with questions concerning business operations and business activity. Many businesses fear that this information will end up in the public sphere, if reported on the forms.

When are the changes effective?

Immediately, however the SBA is planning to release more details through an FAQ.

We’ll keep you updated as information is released.

Contact us for more information, and don’t forget to check out our PPP Headquarters.