SBA Publishes PPP Loan Necessity Questionnaires


By Jacob W. Scott and Erik M. Coon of Smith, Currie & Hancock LLP
Published on November 11, 2020

After months of ambiguous and constantly-shifting guidance, the Small Business Administration (SBA) has finally published information hinting at how it will determine whether Paycheck Protection Program (PPP) borrowers certified in good faith that economic uncertainty made the PPP loans necessary. As we noted in May, SBA walked back what borrowers perceived as threats of prosecution for inadvertently making certifications of economic uncertainty, and provided safe harbors for loans under $2 million and for borrowers that made erroneous certifications in good faith. However, the clarifications remained vague. A recent announcement by the SBA suggests that it will be looking closely at a borrower’s performance after receiving the PPP funds, but it remains unclear what impact those factors will have on determining whether the borrower made its representation of economic uncertainty in good faith.

On October 26, 2020, SBA published a notice in the Federal Register announcing its intent to release two new forms that shed light on what information the agency will review to evaluate borrowers’ good faith certifications: SBA-Form-3509 (for for-profit borrowers) and SBA-Form-3510 (for nonprofit borrowers). When a lender sends the appropriate form to a borrower whose loan is subject to review, the borrower and its affiliates will have ten business days to return the form and accompanying documentation to the lender. Failure to do so could result in a determination that the borrower was ineligible for some or all of the PPP loan or ineligible for forgiveness of some or all of the loan amount.

Notably, both forms require borrowers to answer questions and provide information concerning the borrower’s circumstances at the time of application, as well as their economic experience in the months after receiving the loan. Borrowers will be required to provide, among other things: (1) documentation detailing their gross revenues for the first quarters of both 2019 and 2020; (2) information about whether and how COVID-19 has impacted their operations; (3) documentation regarding the amount of cash and cash equivalents on hand when the PPP loan application was submitted; and (4) documentation regarding both the amount of dividends or other distributions paid to owners and all debt prepayments made between March 13, 2020 and the end of the covered period.

The forms also require borrowers to indicate whether the provided information is confidential, which suggests that the responses will be subject to release under the Freedom of Information Act (FOIA). Careful marking of submitted materials as confidential will be important to ensure that confidential business information is not released to the public. We previously addressed the new standard for confidential business information under FOIA here.

SBA has not disclosed how it will review and evaluate these forms and accompanying documentation in determining a borrower’s certification of necessity. But the inquiry into a borrower’s economic experience after applying for the loan—the period of economic uncertainty PPP loans were meant to smooth out—has some troubling elements. For example, comparing a borrower’s 2019 Q2 revenues to its 2020 Q2 revenues hardly seems relevant to determining whether a borrower was facing economic uncertainty at the time it submitted its loan application. Until SBA finalizes the new forms and issues further guidance, covered borrowers should begin to review their PPP applications and accompanying certifications, gather the information and documentation required by these forms, and closely monitor SBA for further guidance.

Jake ScottJacob W. Scott is Of Counsel in Smith Currie’s Washington, D.C. office. In serving his extensive national client base, Jake practices government contract law and construction litigation, with a focus on federal construction law, where the intersection of his skill sets in litigation and contracts manifests. He can be reached at or 202.452.2140.

Erik M. CoonErik M. Coon is an Associate with Smith Currie. He represents organizations in construction law and litigation matters, particularly in government contract bid protests and disputes and in procurement issues. He can be reached at or 202.735.2460.