By Scott Tracy of CliftonLarsonAllen
Published July 19, 2021
Key insights
- The SBA has dropped its loan necessity questionnaire requirement (Forms 3509 and 3510).
- Borrowers still need support for certifications related to the necessity of the PPP loan request.
- The SBA has up to six years from date of forgiveness to review the loan.
- The loan necessity questionnaire can provide guidance when reviewing your documentation.
The U.S. Small Business Administration (SBA) has informed lenders that Loan Necessity Questionnaires (Forms 3509 and 3510) are no longer required to be submitted by borrowers. Borrowers who have already been asked to complete the questionnaire do not need to complete and submit the form.
The SBA released the loan necessity questions in November 2020 as part of its review process for loans over $2 million. The forms were controversial from the beginning, as borrowers and various trade groups felt they required information that should not be used to determine the borrower’s necessity for the loan. SBA guidance indicated the loan necessity assessment was as of the loan application date — not based on actual results subsequent to the receipt of the loan proceeds.
Still required to document loan necessity
Borrowers need to be diligent in building and maintaining documentation supporting economic need for the loan proceeds. Just because the loan necessity questionnaires are no longer required, it doesn’t mean the SBA is promising that no reviews will be done.
Since the early days of the program, documenting economic need was a key step in the process. In FAQ #31, the SBA provided two criteria that borrowers needed for loan necessity at the time of application: (i) current business activity, and (ii) ability to access other sources of liquidity sufficient to support ongoing operations in a manner not significantly detrimental to the business. For loans over $2.0 million, the SBA has up to six years from the date of forgiveness to review the borrower’s compliance with the program.
Insight into the SBA’s potential review
The loan necessity questionnaires don’t need to be submitted to the SBA, but the information requested in the form does provide insight into the SBA’s assessment of economic necessity. As a borrower, when reviewing the documentation you have prepared to support the loan, look to the questionnaire for guidance. The information requested in the form had significance to the SBA — addressing those key points in your documentation could help make a potential review easier.
Scott Tracy is a Principal with CliftonLarsonAllen. He can be reached at scott.tracy@claconnect.com or 414.721.7517.