Keep on Top of PPP Review Prep, Even as Loan Necessity Questionnaire Is Retired

When the Paycheck Protection Program became a part of the aid offered to businesses during the COVID-19 pandemic, there were significant requirements that were made on borrowers. One of these were the Loan Necessity Questionnaires, Forms 3509 and 3510, which required significant information to be able to justify your company’s need for assistance from this program. However, a recent change by the U.S. Small Business Administration means that these forms will no longer be required by lenders from their borrowers. But how will this impact how the rest of the process works?

Keep on Top of PPP Review Prep, Even as Loan Necessity Questionnaire Is Retired

If you’re considering getting a loan from the PPP aid, you no longer need to complete and submit these forms, even if you’ve been asked to complete one in the past. Released in November 2020 by the SBA, the Loan Necessity Questionnaire was part of the review process required for PPP loans of over $2 million. Considered controversial from the start, these forms included a range of information that was required but didn’t necessarily have a place in determining the borrower’s need for a loan. The information was also based on the loan application date, not the actual results that happened following the loan proceeds being received.

Loan Necessity Documentation Still Required

Though the Loan Necessity Questionnaires are no longer required, you’ll still need to build and maintain your documentation that supports your company’s economic requirement for the loan funds. The rollback of the questionnaires may have happened, but that doesn’t mean that you won’t be subject to a review of your company’s finances by the SBA in the future, so make sure you’ve prepared proper documentation of the issues your company has faced during the pandemic.

This is partially due to the documentation requirement that was a key step from the very beginning of the program. For example, in FAQ 31, there were two criteria provided by the SBA which borrowers were required to meet at the time the loan was applied for.

This included showing current business activity, or that your company was actively in operation. The second included documenting your company’s ability to access other liquidity sources that were available in order to provide funding for ongoing operations, provided that they allowed your company to continue operating in a manner that was not seriously detrimental to your company’s future. For loans that were over $2 million USD, the SBA may review your company’s compliance with the program for up to six years following the date of forgiveness, so make sure that you’re keeping careful records during that time.

What Happens in the SBA’s Possible Review Process?

Though the Loan Necessity Questionnaires will not need to be submitted to the SBA, the information that the forms ask for do provide you with strong details about what kind of information the SBA may be looking for when they are trying to determine whether your company has financial necessity for the PPP loan. This provides you with a lens into the kind of information you should hold onto in case of a possible review in the future.

If you’re considering applying for a PPP loan, take a careful look at these documents, even if you don’t need to submit them any longer. This will help you determine what kind of details to record for a possible review in the future. Even if you don’t understand why the SBA is asking for particular information, knowing that the SBA considers that information of vital importance helps you decide what to keep track of. The questionnaires will provide you with guidance on what you should document so that a possible future review will go more easily.

How ALL CPAs Can Help

The process of getting a PPP loan or documenting your business’ finances after receiving one can seem complex, and if you don’t understand what the government is looking for in this documentation, it can be difficult to make sure you’ve recorded the right information. Fortunately, ALL CPAs’s team of experienced tax, accounting and financial professionals can help you through the process. Learn more about our PPP & ERC services here. 

For more information on the SBA’s review process or documentation, please contact your ALL tax advisor or call us at 617-738-5200.