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When Congress initially authorized the Paycheck Protection Program (PPP), its intent was to provide loans that would be partially or completely forgiven if used for the intended purposes of helping businesses affected by COVID-19 stay afloat and maintain payroll. As part of the Small Business Administration’s (SBA’s) loan application, Form 2483 or the lender’s equivalent form, borrowers had to certify under penalty of imprisonment and monetary penalties to the following:
Needless to say, the contemplation of free money had businesses scrambling to take out PPP loans, whether they were impacted by economic effects of COVID-19 or not. Therefore, the Treasury had initially indicated the need for all PPP loans to be audited, but later specified only those of $2 million or more would be subject to an audit.
After a long wait, the SBA has initiated a compliance program to evaluate the good-faith certifications that borrowers made on their PPP Borrower Applications stating that economic uncertainty made the loan requests necessary. Accordingly, each borrower that, together with its affiliates, received PPP loans with an original principal amount of $2 million or greater will be required to participate in this compliance program, and will soon be receiving one of the following multi-page forms from their lender:
Sometimes referred to as a “loan necessity questionnaire,” the form and requested supporting documents must be submitted to the lender servicing the borrower’s PPP loan. The completed form is due to the lender within 10 business days of receipt. Among other things, the forms request:
The SBA is reviewing these loans to maximize program integrity and protect taxpayer resources. The information collected will be used to inform the SBA’s review of each borrower’s good-faith certification that economic uncertainty made their loan request necessary to support ongoing operations. Receipt of this form does not mean that the SBA is challenging that certification. After this form is submitted, the SBA may request additional information to complete the review. The SBA’s determination will be based on the totality of the borrower’s circumstances.
Failure to complete the form and provide the required supporting documents may result in the SBA’s determination that the borrower is ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and the SBA may seek repayment of the loan or pursue other available remedies.
If you have any questions related to PPP loans over $2 million or need assistance completing the form and assembling supporting documentation, please contact Cray Kaiser today.
Please note that this blog is based on laws effective in November 2020 and may not contain later amendments. Please contact Cray Kaiser for the most recent information.