New Guidance on PPP Loan Necessity Questionnaire

Issued After Weeks of AGC Engagement with SBA/Treasury

On December 9, the Small Business Administration (SBA) and Treasury Department issued new guidance on the “Loan Necessity Questionnaire” that SBA is requiring borrowers with loans of $2 million or more to complete as they apply for loan forgiveness. The new guidance does not expressly disavow any intention to use this controversial form to change the rules in the middle of the game but it does provide that SBA will base its review of a borrower’s eligibility for a PPP loan on the borrower’s “individual circumstances” and “in light of the language of the certification and SBA guidance,” as required “at the time of the loan application, and “even if subsequent developments resulted in the loan no longer being necessary.” SBA adds that it “may take into account the borrower’s circumstances and actions both before and after the borrower’s certification” but implies that it will consider the latter only “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.” 

The agencies also explain that a borrower’s response to the questionnaire will not form the sole or exclusive basis for a finding that a borrower was not eligible for its loan. To the contrary, the new guidance provides that “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,” and it states that the agency will wait to make a “final determination” until “after reviewing any additional information that a borrower chooses to submit.”

This guidance follows several weeks of quiet but frank communication between AGC and federal decisionmakers, and it comes on the heels of the lawsuit (read here) that AGC has filed against both SBA and the Office of Management and Budget in the U.S. District Court for the District of Columbia. In that lawsuit, AGC seeks both restrictions on SBA’s use of its questionnaire and to compel the agency to officially release the form, to extend the comment period on the form for another 60 days, and to revise the form in light of the comments that SBA receives. At the heart of the recent communications and the litigation lies the certification that all borrowers had to make, on their loan applications, that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant. At this point, AGC continues to consider its legal options.

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