The SBA has released an updated version of its Paycheck Protection Program Frequently Asked Questions,[1] adding new question 53 that addresses the Forms 3509 and 3510 being sent to certain borrowers.

The new form, initially reported about on October 30, 2020, is being sent to borrowers who face scrutiny regarding whether their certification that their loan request was necessary given the current economic uncertainty was made in good faith. For those who had a loan of less than $2 million, the SBA had previously stated that their certifications will be deemed to have been made in good faith,[2] so those with loans of $2 million or more are the ones facing scrutiny of their certification.

The new question and answer provide limited details on why the form is being sent out and how the data requested will be used:

53. Question: Why are some PPP borrowers receiving a Loan Necessity Questionnaire (SBA Form 3509 or 3510)?

Answer: As previously announced, SBA is reviewing all loans of $2 million or more, and other loans as appropriate, for eligibility, fraud or abuse, and compliance with loan forgiveness requirements. As part of this process, SBA is providing a Loan Necessity Questionnaire to lenders for them to provide to PPP borrowers that, together with their affiliates, received loans of $2 million or more. Upon request from their lender, borrowers should return the completed questionnaire to their lender within 10 business days of receipt.

The information that borrowers provide on the questionnaire will help SBA assess those borrowers’ certification in their loan application that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,” as required by the CARES Act

A request to complete the Loan Necessity Questionnaire does not mean that SBA is challenging a borrower’s certification that is required by the CARES Act. SBA’s assessment of a borrower’s certification will be based on the totality of the borrower’s circumstances through a multi-factor analysis. As described in FAQ #46, SBA will assess whether the borrower had adequate basis for making the required good-faith certification, based on its individual circumstances in light of the language of the certification and SBA guidance. This certification is required to have been made in good faith at the time of the loan application, even if subsequent developments resulted in the loan no longer being necessary. In its review, SBA may take into account the borrower’s circumstances and actions both before and after the borrower’s certification to the extent that doing so will assist SBA in determining whether the borrower made the statutorily required certification in good faith at the time of its loan application.

After a borrower submits its completed questionnaire, SBA may request additional information, if necessary, to complete its review. When additional information is requested, borrowers will have an opportunity to provide a narrative response to SBA explaining the circumstances that provided the basis for their good-faith loan necessity certification. SBA will make a final determination that a borrower lacked an adequate basis for its loan necessity certification after reviewing any additional information that a borrower chooses to submit. This targeted, multi-step approach will ensure the integrity of the evaluation process and expeditious processing, as well as properly allocate SBA’s finite resources to those loans that require additional review.[3]

[1] Paycheck Protection Program Frequently Asked Questions, As of December 9, 2020, Small Business Administration, https://www.sba.gov/sites/default/files/2020-12/Final%20PPP%20FAQs%20%28December%209%202020%29.pdf (retrieved November 9, 2020)

[2] Paycheck Protection Program Frequently Asked Questions, As of December 9, 2020, Small Business Administration, Question 46

[3] Paycheck Protection Program Frequently Asked Questions, As of December 9, 2020, Small Business Administration, Question 53