SBA Questionnaires Increase Scrutiny for PPP Loans Over $2M

November 13, 2020
Hinshaw Alert

The Small Business Administration (SBA) is seeking comments on two forms of questionnaires: Form 3509 (Loan Necessity Questionnaire for For-Profit Borrowers) and Form 3510 (Loan Necessity Questionnaire for Non-Profit Borrowers). These forms—which Paycheck Protection Program (PPP) lenders would be required to issue—are to be completed by PPP borrowers who, together with their affiliates, received more than $2 million in PPP loans.

In the form's instructions, the SBA stated that a failure to complete the form and provide the required supporting documents may result in a determination by the SBA that a borrower is ineligible for the PPP loan, the PPP loan amount, or any forgiveness amount claimed. The SBA further noted, too, that in such situations, it may seek repayment of the loan or pursue other available remedies.

The forms must be returned to the lender within ten business days of their receipt along with the requested supporting documentation. The PPP lender is required to upload the form and documents to the SBA Forgiveness Platform. It must separately enter the borrower's responses to each question into the web form available on the platform and upload this information and the required form within five business days after a borrower provides the completed form with all required responses, supporting documents, signatures, and certifications.

Many PPP borrowers will be concerned that the SBA has stated that the forms will be used by the SBA to collect information designed to "inform the SBA of a [borrower's] good-faith certification that economic uncertainty made the [borrower's] loan request necessary to support [its] ongoing operations."

Previously, the SBA has advised PPP borrowers that it will examine all PPP loans in excess of $2 million, and that a review of the good-faith certification would be part of this examination. With respect to this certification, the SBA has also stated that PPP borrowers "must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business."

It is not clear when these forms will be available for distribution by PPP lenders. We recommend, however, that PPP borrowers with loans in excess of $2 million begin preparing their responses and collecting the relevant documents immediately. Once the form has been approved, borrowers should carefully complete the form and any required documentation.

The forms make it clear that the SBA will be focusing on for-profit borrowers that:

For-Profit Questionnaire

The questionnaire is divided into two parts: Business Activity Assessment and Liquidity Assessment.

Business Activity Assessment

For the Business Activity Assessment, a for-profit borrower must disclose the following, along with providing the requested supporting documentation:

Liquidity Assessment

For the Liquidity Assessment, a for-profit borrower must disclose the following, along with providing the requested supporting documentation:

Non-Profit Questionnaire

Non-profits will also have to complete a Loan Necessity Questionnaire. This questionnaire includes a similar set of questions to those outlined above which have been designed to address PPP non-profit borrowers.


Both for-profit and non-profit PPP borrowers must attest to the following when completing the questionnaire:

[1] Distributions made by a partnership or S-corporation that are designed to be used only for owners' estimated quarterly tax payments are accepted, as long as they do not exceed the tax liability on profits earned in the first three quarters of 2020, 110% of the pro-rata share of last year's tax liability on distributions, and/or 100% of the pro-rata share of tax liability on total distributions in 2020.