An update from the SBA announced that it is no longer requiring PPP borrowers to complete the Loan Necessity Questionnaire as of July 9, 2021. This will impact any borrower that (together with its affiliates) received a PPP Loan of $2 million or more and has recently filed or is about to file for request for loan forgiveness. What does this mean for you?
The Big Bang Theory is one of the most popular sitcoms in television history. The gist of the show is four highly-educated gents living next to a gal from a small town. Leonard, Sheldon, and Raj are all physicists, and Howard is an engineer. Penny is their next-door neighbor who dreams of becoming a famous actress. Through the various seasons, all these characters share in each other’s victories and defeats. Penny and Leonard wind up together, both on the show and in real life. Sheldon is a theoretical physicist who is incredibly intelligent but lacks the day-to-day social skills that are required to build lasting relationships. In the episode entitled “The Combustible Questionnaire,” Raj and Howard fill out a questionnaire for Sheldon and submit it to a dating website. Once the questionnaire is received, the name “Amy Farrah Fowler” pops out. They meet…they date…and in the final season…they get married.
During the series, Sheldon creates a podcast called “Fun with Flags.” Essentially a very boring look at the history of flags. Yet, it has over four million followers. What if, during Covid, Sheldon’s podcast lost millions of dollars in advertising revenue (ok…let’s just PRETEND)? Perhaps Sheldon could have applied for a $2M PPP loan under the CARES Act.
Up until July 9, Sheldon would be required to fill out a Loan Necessity Questionnaire (either form 3509 for For-Profit borrowers or Form 3510 for Not-For-Profit borrowers) (“LNQ”) in addition to providing the regular payroll and nonpayroll expense documentation to substantiate its application for loan forgiveness. Because Sheldon is a physicist, he probably would have no trouble filling out the LNQ. But what about all the other borrowers under the PPP? They most likely would have to consult with professionals to help fill out the LNQ.
The requirement that borrowers fill out a LNQ when seeking forgiveness has combusted as of July 9. In other words, the SBA has officially communicated with lenders that LNQs will no longer be required for loans of $2 million or more. Prior to July 9, LNQs were an official part of the process for borrowers seeking forgiveness on loans of $2M or more.
The AICPA was part of 80 organizations that signed a letterurging the SBA, along with Congress and the Treasury, to temporarily suspend use of the LNQs because of concerns about the voluminous amounts of information and quick turn around on completing the forms.
According to the new SBA announcement, “Effective immediately, SBA will no longer request the Loan Necessity Questionnaires (SBA Form 3509 and 3510) for any PPP loan reviews. Loan Necessity Questionnaires that SBA has previously requested are no longer required to be submitted to SBA. If you have an open request for additional information related to the Loan Necessity Questionnaire, please close the request in the (SBA) platform and submit the loan back to SBA. The Loan Necessity Questionnaire module within the platform will also be removed.”
Please keep in mind that the current announcement does not eliminate the issue of loan necessity – that continues to be an issue for borrowers with loans over $200,000. The current announcement just means that such borrowers will not need to complete a LNQ in the ordinary course of applying for loan forgiveness, but they may still be required to prove loan necessity, including by completing a LNQ, if they are audited by the SBA.
Science involves good record keeping and physicists require precise measurements. Just in case Congress decides to reinstate the LNQs, it would be prudent for all borrowers to keep accurate details about how their loan proceeds were used on forgivable expenses. BAZINGA!!!!
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