Specific companies with multimillion-dollar Paycheck Protection Program loans are confronting new questions from the Small Business Administration on whether the money was really needed.
In a notice published Oct. 26, the SBA said it would issue two new questionnaires — Form 3509 for for-profit borrowers and Form 3510 for nonprofit borrowers — asking for information on "loan necessity." The forms were not available at press time.
Carol Wilkerson, SBA head of public relations, told S&P Global Market Intelligence in a statement Oct. 26 that "These forms are for specific borrowers with PPP loans worth $2 million and above." She did not specify which companies must fill out the new questionnaires, and the exact questions that will be on the forms are not yet known.
The notice did say, however, that the government estimates only 52,000 borrowers will be affected. Jessica Jeane, director of public policy and communications for the National Society of Accountants, said Oct. 26 that the limited number of borrowers facing questions "likely indicates these questionnaires are only applicable to top-dollar loans."
The PPP provides forgivable loans to businesses trying to stay afloat during the COVID-19 pandemic. It requires all the funds to be spent on payroll, rent and utilities, and mortgage interest to be eligible for forgiveness.
Wilkerson noted that the SBA and the Treasury Department have been saying since the program launched in April that the government would be scrutinizing PPP loans of $2 million and above to see whether the loans were truly necessary. Facing a public backlash, some large companies have given the money back.
Jeane told S&P Global Market Intelligence that these back-end questions are probably coming now because Treasury and the SBA were facing an emergency rollout of the program earlier in the year. "This sort of information gathering by the SBA was not done ahead of loan issuance. Under ordinary circumstances, the SBA would have likely issued similar screening questions ahead of issuing the loans, rather than on the back end," she said.