We have three new developments to report regarding the paycheck protection program (“PPP”). The first is that we have heard from lenders that the Small Business Administration (“SBA”) is starting to approve loan forgiveness applications, specifically for loans under $2 million. Based on information gathered from the lending community and those close to the SBA, we expect the pace at which it will continue to approve loans to improve dramatically.
The second development is that we have confirmed that some lenders have started sending Form 3509 (Loan Necessity Questionnaire for For-Profit Borrowers) to borrowers to complete, while others are indicating to borrowers that the form may change. We wrote about this new form (and Form 3510 applicable to Not-For-Profit borrowers) on October 30, 2020, and since that time neither the Treasury Department nor SBA has published these forms on their PPP websites.
In short, these forms solicit detailed financial information regarding a borrower’s eligibility for the loan, both in terms of liquidity and business activity. These forms apply to and are only being sent only to borrowers whose loan amount is $2 million or more because the SBA stated in FAQ #46 that borrowers with loans less than that amount “will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” More to come on how the SBA uses these forms, especially since they require information that many considered beyond the scope of the representation made on the loan application as of the application date.
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The third development is that on November 5, 2020 a Federal District Court in the District of Columbia issued a 40-page memorandum opinion requiring the SBA to disclose the names and loan amounts of all borrowers under the PPP and Economic Injury Disaster Loan (“EIDL”) programs. The SBA resisted the release of this information to news organizations under Freedom of Information Act (“FOIA”) requests because it argued that loan amounts are based on borrowers’ payroll information, which is confidential, and that revealing the loan amounts would necessarily reveal the confidential payroll information. The SBA noted that it previously released borrower loan amount data on loans under $150,000 in aggregated form, and data on loans over $150,000 in buckets based on ranges of loan amounts. The Court rejected the SBA’s argument and ruled in favor of the news organizations.
The Court also noted that the PPP application included a disclaimer stating that the SBA would automatically release the borrower’s name and loan amount under a proper FOIA request. Similarly, it noted that the SBA told EIDL applicants that FOIA “generally” requires it to release “information such as names of borrowers,” as well as “loan amounts at maturity.” The Court summed up by stating that “[a]ll borrowers were thus on notice that their names and approved loan amounts would be public record.”
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