SBA Releases Draft Questionnaire for PPP Borrowers with Loans of $2 Million or More.November 05, 2020
The Small Business Association has released a draft questionnaire which provides insight into the criteria that the SBA will use to evaluate a borrower’s economic need. Here’s what you should know.
Since the Paycheck Protection Program (PPP) started, we at KLR have stressed the importance of maintaining good records and documentation regarding your company’s need for a PPP loan. We wrote two blogs specifically on this subject: (click PPP: What to do after you've applied) and PPP: What You Need to do Before May 7th). As discussed in those blogs and our webinars this year, a PPP Borrower was required as part of the PPP loan application to certify the organization’s “economic need” for the PPP loan. So how has this changed six months later? We dive in below.
Loan Necessity Questionnaire
Six months later, the SBA has now released a draft of a questionnaire for PPP borrowers, together with their affiliates, that obtained PPP loans in the original amount of $2MM or more that will be used to assist the SBA in evaluating a borrowers “economic need”. While the questionnaire is a draft, and not official, it provides insight into the criteria that the SBA will be looking at regarding economic need. The SBA has two versions of the questionnaire, one for non-profit organizations (click here) and one for for-profit entities (click here).
In reviewing the draft questionnaire, it is very “data” driven and does not leave much room for context that will be needed when ultimately evaluating the “economic need” of the borrower at the time of the PPP loan application. Borrowers should also note that the questionnaire does not only focus on financial performance of the borrower prior to obtaining a PPP loan, but also during the covering period.
Ultimately, it’s still unknown how the SBA will use the information gathered in the questionnaire to evaluate a borrower’s “economic need.”
What should you do?
Remember at this time, this a draft questionnaire. Many professional organizations across the country will be commenting on it, and ultimately there will most likely be changes and modifications so we don’t suggest borrowers spend too much time reviewing the questionnaire and trying to guess how the SBA will use the information being requesting to evaluate economic need.
However, this gives PPP Borrowers with loans greater than $2MM a general idea of the information and criteria the SBA will ultimately be using to determine economic need. We suggest that you start reviewing your due diligence memo and files to make sure that you have most, if not all of the information, likely to be requested on hand or readily available.
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