The League believes that when considering economic uncertainty, the Small Business Association, SBA, should take a holistic approach to PPP. Specifically, the SBA should not solely consider a small business' revenue levels at the beginning and during the pandemic to assess whether they needed a PPP loan.
To assess whether small businesses qualified for PPP at the time of their application, the SBA required applicants to complete SBA Form 3509 "Loan Necessity Questionnaire (For-Profit Borrowers)," and SBA Form 3510, "Loan Necessity Questionnaire (Non-Profit Borrowers)." Forms 3509 and 3510 are designed to collect additional information from non-profit or for-profit borrowers that, together with their affiliates, received PPP loans of $2 million or more. The information will be collected during SBA's review of these loans, which includes assessing the borrowers' good-faith certifications that due to the economic uncertainty their PPP loan requests were necessary to support ongoing operations. As part of their response to the questionnaire, borrowers may include a statement regarding the circumstances that provided the basis for their good-faith loan necessity certification.
The SBA should consider that the uncertainty of the unknown, and the business owners desire to protect their employees, led small businesses to apply for PPP rather than face the undesirable option of cutting payroll. The original purpose of PPP was to prevent mass layoffs, not to means test small businesses retroactively to see if they could survive without it or not.
Furthermore, the League urged the SBA to act expeditiously when reviewing the PPP questionnaires, to not freeze borrowing and lending activity due to the uncertainty of whether applicants' loans will be forgiven. The League submitted its comments to the SBA on March 5. Please find the League's full comment letter here. If you have any questions about PPP updates or the questionnaires mentioned above, please contact League Regulatory Counsel Chris Noble, Esq.