Find out more about the original PPP Loan program.
Learn more about loan application certifications.
Find out who needs to fill out an SBA compliance questionnaire.
Learn how the SBA will review information from borrowers.
When Congress initially authorized the Paycheck Protection Program, they intended it 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 to help those businesses maintain payroll. As part of the Small Business Administration’s (SBA’s) PPP loan application, Form 2483 or lender’s equivalent form, borrowers had to certify under penalty of imprisonment and monetary penalties to the following:
Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.
Borrowers must use funds to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the PPP Rule. I understand that if I knowingly use funds for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.
Needless to say, the contemplation of free money had businesses scrambling to take out PPP loans. However, some took loans whether they felt the economic effects of COVID-19 or not.
The secretary of the treasury had initially indicated the need for all PPP loans to be audited. However, he later specified only those of $2 million or more would be subject to audit.
PPP compliance program
After a long wait, and as long anticipated, the SBA has initiated a compliance program. The program will 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 must participate in this compliance program. They will also soon receive one of the following multi-page forms from their lender:
Form 3509, for For-Profit Borrowers, or
Form 3510, for Non-Profit Borrowers.
Loan Necessity Questionnaires
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 lender must send the completed form within ten business days of receipt. Among other things, the forms request:
Whether the borrower’s business was shut down as a result of a government order.
Whether any of the business’s owners were compensated in excess of $250,000.
The borrower’s liquidity before and after receipt of the loan funds and during the covered period.
The business’s gross revenue amounts for 2019 and 2020.
What happens next?
The SBA will conduct a review of these loans to maximize program integrity and protect taxpayer resources. The information collected will inform 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 challenges that certification. After submission of this form, the SBA may request additional information, if necessary, to complete the review. Then, the SBA will base its determination 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.
Do you have questions related to this issue? Do you need assistance completing the form and assembling supporting documentation? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations.
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For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.