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SBA Cracks Down on PPP Abuse With New “Necessity Questionnaire”

by | Dec 18, 2020 | Employment Issues For Employers |

As we previously blogged, Congress established the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  This $669 billion-dollar loan program was designed to help businesses negatively affected by COVID-19 continue to pay their employees.  At the beginning of the application process, all PPP applicants were required to certify in good faith that their loan requests were necessary to support their operations in the face of the “current economic uncertainty” caused by COVID-19.  In light of increased reports of abuse, the SBA has begun to issue “Loan Necessity Questionnaires” to borrowers who received loans of $2 million or more.

The questionnaire requires recipients to provide information such as their 2020 revenue, compensation of employees in excess of $250,000, and shareholder equity.  According to the SBA, the goal of the questionnaire is to assess the borrower’s good faith certification based on the “totality of the borrower’s circumstances through a multi-factor analysis.” Some have criticized the questionnaire because it will assess whether a loan request was made in good faith by referring to information that wasn’t available to applicants at the time of their request.  In fact, the questionnaire has already been subject to legal challenges in court.

Nonetheless, for the time being, PPP recipients of $2 million must be prepared to answer the questionnaire.  Borrowers have just 10 business days to complete the questionnaire upon receipt from their lender, which means that PPP recipients should start gathering critical information in advance.  If you received $2 million or more in PPP funds, you should contact Thatcher Zavaro & Mani to help you prepare for a potential request to complete the questionnaire.

If you have any questions about the Paycheck Protection Program, or any area of employment law, contact Thatcher Zavaro & Mani at 301-850-1246www.ThatcherLaw.com. Email me at [email protected].  Follow us on: