Payroll Protection Program (PPP) Update – SBA Drops Loan Requirement Questionnaire | Jackson Walker

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The Payroll Protection Program (PPP) officially ended on May 31, 2021. From April 2020 to May 2021, the program provided nearly 12 million loans totaling nearly $ 800 million to help businesses keep their employees busy during the COVID-19 crisis.

This article addresses issues related to the PPP Loan Requirement Questionnaire (for example, Form 3509 SBA, Loan Requirement Questionnaire (for commercial borrowers) and SBA 3510 form, Loan Requirement Form (Non-Commercial Borrowers).

First Draw PPP Loans

When applying for a PPP loan in the first or second draw, all borrowers were required to confirm in good faith that “[c]The current economic uncertainty makes this loan request necessary to support the applicant’s current operations. ” (“Certification Needed”). With regard to First Draw PPP Loans, the SBA has provided a safe haven that any borrower who, together with their affiliates, received a First Draw PPP Loan with an initial principal amount of less than $ 2 million, will be deemed to have provided the required certification with respect to the need to apply in good faith for a PPP Loan. the first draw. However, for first-run PPP loans of $ 2 million or more, SBA provided SBA Form 3509. Loan Requirement Questionnaire (for commercial borrowers) and SBA 3510 form, Loan Requirement Questionnaire (Non-Commercial Borrowers) (“LNQ”) lenders to provide PPP borrowers who, along with their affiliates, received first draw PPP loans of $ 2 million or more. LNQ’s stated goal was to assist the SBA in screening PPP loans for eligibility, fraud or abuse, and meeting loan forgiveness requirements. However, the actual effect was to create another layer of paperwork and bureaucracy, which negatively impacted lenders and borrowers and severely impacted the SBA’s ability to process loan forgiveness applications.

Second Draw PPP Loans

For the second draw PPP loans, all borrowers had to confirm in good faith that “[c]The current economic uncertainty makes this loan request necessary to support the applicant’s current operations. ” As the borrowers of the second PPP draw were required to demonstrate a 25% decrease in gross revenues, all borrowers of the second PPP draw were judged to be in good faith and had complied with the required certification in good faith as to the need for the loan. LNQs were not required for the second draw PPP loans.

Revocation of the Questionnaire on the need for a PPP loan

June 21, 2021 SBA requested the Office of Management and Budget (OMB) to withdraw Approval of LNQ forms (for example, Form 3509 and Form 3510). The SBA noted that while LNQs “had a disincentive effect and prevented program abuse by applicants who failed in good faith to obtain loan eligibility certification,” LNQs are burdensome for both lenders and borrowers, and removing them would reduce this burden and allow SBA to meet their obligation to process forgiveness decisions within the statutory 90-day forgiveness deadline.

On July 2, 2021, the SBA formally notified PPP lenders that they would no longer need to receive LNQ from borrowers seeking forgiveness of PPP loans of $ 2 million or more. This will primarily benefit PPP borrowers with loans of $ 2 million or more who have not yet applied for loan forgiveness. The SBA is in the process of implementing a formal policy change to perpetuate the removal of the LNQ requirement and will release a related FAQ shortly.

PPP Loan Reviews and Backup Documentation

It should be noted that the removal of the LNQ requirement does not change the SBA’s verification procedures for PPP loans. In particular, the SBA may take into account “the circumstances and actions of the borrower. both before and after certification of the borrower to the extent that it will assist the SBA in determining whether the borrower has complied in good faith with mandatory certification when applying for a loan under the First PPP Draw. ” (See FAQ # 53.) PPP loans are still subject to SBA review and borrowers must continue to retain all relevant information and documentation to support the application and manage their PPP loan (s).

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