The Paycheck Protection Program was created to provide a lifeline for businesses struggling in the face of the COVID-19 crisis. When the program was established, the Small Business Administration (SBA) made clear that in order to ensure that the funds were being used for their intended purpose‚ to help businesses survive and continue paying their employees — all borrowers would be required to certify two specific assertions found within their lender’s application form or Form 2483, the SBA loan application:
The PPP loans were identified as potentially forgivable, and though it would be nice to think that only businesses truly in need would avail themselves of the funds, the temptation was apparently too much for some. Applications poured in, leaving many questions as to whether everybody that received PPP loans had actually been struggling as a result of the crisis. The reality of the situation led to the secretary of the treasury suggesting a need for the loans to be audited, and this idea was eventually solidified in the form of required audits for anybody that had received a PPP loan of $2 million or more.
Months later, the Small Business Administration has put forward a compliance program designed to ascertain whether those borrowers subject to the suggested audits had acted in good faith and in keeping with the certifications that they made when they first applied for their loans. Participation in the program is required of anybody that received $2 million or more in PPP loans.
PPP borrowers in this category can expect to receive multi-page loan necessity questionnaires shortly. They will be sent directly from their lenders, with for-profit borrowers receiving Form 3509 and non-profit borrowers receiving Form 3510. Once the forms are received, the borrower will have ten business days to complete them and compile all required documentation in support of their loan. The information that needs to be submitted will include:
Once the information is collected, the SBA will determine whether it supports the original good faith certification that the borrower made regarding the necessity of the loan in the face of economic uncertainty, and whether the funds were used to support their business continuity. The hope is that the evaluation process will serve to assure the integrity of the program and let taxpayers know that their resources were used appropriately.
It is important for recipients of the questionnaires to understand that receiving one does not indicate that your loan status is in jeopardy or that your integrity is being challenged. The process is an individual review particular to each borrower and may even require additional documentation in the future. That being said, compliance and cooperation are required, and failure to return a completed form and documentation requested may jeopardize the loan’s amount, eligibility or status as forgivable and may lead to the Small Business Administration seeking legal remedies, which may include requesting return of the funds.
The economic uncertainty surrounding COVID-19 has created a new environment and many questions. If you received a PPP loan and now need assistance in completing the information required on the forms, contact your accounting professional as soon as possible.
About Gordon McNamee, CPA
Gordon McNamee, CPA is an Upland based CPA who helps with small businesses, individuals and homeowner associations. A former IRS agent, he has been a CPA since 1991 offering his expertise in individual, corporate, trust, estate and payroll taxes. A specialty of his is HOA tax planning and preparation. In addition, he provides accounting and financial statements for both individuals and businesses.
