New SBA PPP Loan Necessity Questionnaire Required For Large Borrowers

Businesses and not-for-profits that received $2 million or more in PPP loans may be asked to complete one of two new “loan necessity” questionnaires being sent to lenders by the SBA for distribution to large borrowers. The new forms are designed to collect supplemental information that SBA loan reviewers will use in evaluating the good-faith certification borrowers made on their PPP applications that economic uncertainty made their loan request necessary to support ongoing operations.

The forms are SBA Form 3509, Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers), (view PDF) and SBA Form 3510, Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers) (view PDF). Forms 3509 and 3510 will be available only through lenders and will not be published on the SBA site.

Upon receipt of the questionnaire from the lender servicing their PPP loan, borrowers have only 10 business days to return the completed form and required supporting documents to the lender. Lenders are not required to verify or validate any of the borrower's responses or supporting documents on the loan necessity questionnaires. Instructions on the new forms warn borrowers that "failure to complete the form and provide the required supporting documents may result in SBA's determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and the SBA may seek repayment of the loan or pursue other available remedies."


• The questionnaire focuses on the wrong time frame during which the PPP loan must be assessed. They seek gross revenue comparisons between the second quarter of 2020 and the second quarter of 2019 and other metrics and narratives that describe how the borrower has fared during the pandemic. However, borrowers were required to certify in good faith that the loan was needed at the time of the request. "Any circumstances that happened after the certification was made and throughout the pandemic should have no bearing on evaluating the borrower's good faith statement at the time it made the certification," the letters say.
• The new forms ask for liquidity and revenue data, which could expose the personal finances of small business owners. The letter states that "the CARES Act did not include a means-based test, revenue reduction test, liquidity test, or any other metric to assess financial standing in order to assign prioritization of PPP loans to certain borrowers over others."

• Questions about revenue and liquidity data signal a bias against PPP borrowers who survived or remain profitable during the pandemic. Steady or increased revenue with healthy liquidity and continuing employment is a sign that the PPP loan was successful.

• Other questions raise concern that a borrower's answer may lead to a misinformed analysis by the agencies; for example, requests for statements on whether closures or changes in operations were mandatory or voluntary and details on which governmental jurisdiction mandated the closures.

It is overly burdensome that the for-profit and non-profit forms each include 21 questions, many of which have multiple parts. The forms are nine pages each. Supporting documents are required for six questions. This is a level of reporting never previously required by statute or in any process for PPP Loans thus far. The questionnaires will be only one component of the SBA's review and it has been said that borrowers will have the opportunity to provide further context once the initial questions have been reviewed.

Even though the SBA is quick to point out that receipt of the form is in no way a challenge to certification, it is merely part of the ongoing review and verification process, Fuoco Group agrees with the AICPA that if the agencies need more information they instead should request the borrower to provide a narrative statement and documentation to demonstrate that the loan was critical to support ongoing operations. It is important to communicate the reasoning behind businesses' PPP application and put the fears and feelings of the business owner in the context of the pandemic's early days, when the length and severity of business shutdowns were unknown, and lack of cash flow forced layoffs, and inability to cover expenses.

We believe that SBA Forms 3508, 3508EZ, and 3508S, should continue to be used for large borrowers. Our accountants have been monitoring the PPP program guidance, and will alert you to any changes or updates to this requirement that could impact your business or loan forgiveness. In addition, we will keep you aware of any other taxation or financial relief that will be offered by the government that could help you or your business weather the continuing pandemic. Please send your questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or call toll free: 855-542-7537.