SBA’s Loan Necessity Questionnaire

By Frank Milone, CPA, Founding Partner, Assurance & Advisory Services
Nov 03, 2020

We have become aware that the SBA, when reviewing applications for PPP loan forgiveness, have been requesting additional information. Included in this additional information has been a “Loan Necessity Questionnaire” that is required to be completed within 10 business days of receipt from your Lender.

Each for-profit and not-for-profit Borrower that, together with its affiliates, received PPP loans with an original principal amount of $2 million or greater is required to complete this form and submit it, along with the required supporting documents, to the Lender servicing the PPP loan.

Some information to be aware of relating to the Loan Necessity Questionnaire:

  • There are separate forms for for-profit and not-for-profit borrowers
  • The information collected will be used during the SBA’s review of your good-faith certification that economic uncertainty made your loan request necessary to support your ongoing operations
  • Receipt of the form does not mean that your good-faith certification is being challenged
  • SBA’s determination of loan forgiveness will be determined based upon the totality of your circumstances
  • Failure to complete the form and provide the information may result in determination that you were ineligible for the PPP loan, the loan amount, or any loan forgiveness amount claimed
  • The questionnaire has 2 sections, an Activity Assessment and Liquidity Assessment
  • Although the questionnaire is different for for-profit and not-for-profit borrowers, both target information about the impact of COVID on a PPP borrower’s operations and activities and about that borrower’s liquidity
  • Information focused on in the questionnaire includes the following:
    • any voluntary or required suspension of a PPP borrower’s operations related to COVID
    • the mandatory or voluntary changes to operations due to COVID and the cash cost to implement those changes
    • the borrower’s gross revenue in Q2 of 2020 and 2019 
    • a not-for-profit borrower’s Q2 expenses in 2019 and 2020 
    • the amount of cash and cash equivalent as of the end of the calendar quarter immediately before the date of the PPP application  
    • capital expenditures between March 13, 2020 and the end of the 8 or 24 week covered period that the PPP borrower has selected to measure its loan forgiveness
    • whether 20% or more of the PPP borrower’s equity is owned by another publicly held company, a private equity firm, venture capital fund, or hedge fund
    • the existence of endowment funds for not-for-profits and the amount of those funds and any restrictions on use of those funds
    • if the borrower is a school/college/university, whether it offered additional financial assistance to students and if it had declines in tuition revenue due to COVID-19
  • The questionnaire allows borrowers to provide supplemental information to explain information provided in responses
  • The questionnaire will require the borrower to certify that the information provided is true and accurate in all material respects and any false information carry potential civil and criminal penalties

Other considerations based upon our review of the questionnaires:

  • Supplemental statement and information allows the borrower the opportunity to provide additional information or facts that might seem problematic without explanation
  • Many of the questions focus on operations and liquidity at the end of the covered period which may impact thinking on whether to use an 8 week or 24 week period to calculate PPP loan forgiveness

If you have any questions or concerns, please do not hesitate to reach out to Frank Milone or Bill Claffey who co-chair FML’s COVID Task Force.