SBA Proposes PPP Questionnaire for $2M+ Borrowers

By Alan Wolf, YSN

In the wake of criticism for issuing Paycheck Protection Program (PPP) loans to financially viable companies like Shake Shack and the Los Angeles Lakers, and amid suspicion of widespread program abuse and fraud, the Small Business Administration (SBA) is seeking permission to question borrowers who received $2 million or more in PPP loans.

The inquiry would come in the form of a “Loan Necessity Questionnaire,” labeled Form 3509, which is intended to “maximize program integrity and protect taxpayer resources.” The proposed form also states that the information it collects “will be used to inform SBA’s review of your good faith certification that economic uncertainty made your request necessary to support your ongoing operations.”

According to Paul Edelberg, an attorney with the corporate law firm Fox Rothschild, the form will likely be used by the agency to prepare for audits of big PPP borrowers, as all PPP loans of $2 million or more are automatically scrutinized under new SBA and Treasury Department rules.

The latest SBA proposal, which requires approval from the Office of Management and Budget (OMB), would have the questionnaires sent to lenders who in turn would forward them to PPP borrowers. Borrowers would have 10 days from receipt to complete and return the form to their lender. The requested information covers capital expenditures, compensation payments, year-over-year revenue comparisons and other financial disclosures, and supporting documentation is required.

A 30-day public comment period, in accordance with OMB procedures, ended on Nov. 25.

Writing in a company blog, Edelberg said he anticipates pushback from borrowers and lenders. Nevertheless, should the form win OMB approval, he cautions all big PPP borrowers to be careful in answering the questions and to seek legal advice before submitting the form.

“If not stated correctly, the response to such an open-ended question could inadvertently be turned against a borrower by an auditor,” he noted. “Any statement made in this application would constitute an admission in any civil or criminal action brought by the SBA based upon the audit.”