• PPP necessity form: What contractors need to know

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    November 24, 2020
    AUTHOR Jenn Goodman
    PUBLISHED Nov. 24, 2020
    CONSTRUCTION DIVE

    CPA Jack Callahan sheds light on the new loan necessity questionnaire for Paycheck Protection Program borrowers, a requirement that has been called "confusing and burdensome" by industry groups.

    Construction firms that received a Paycheck Protection Program loan of more than $2 million got news late last month that they will be required to fill out a form verifying their need for the loan.

    The Small Business Association is mandating that these borrowers complete a loan necessity questionnaire regarding their operations and financial conditions during the pandemic. It requests information about gross revenues, capital improvement projects, dividend payments and compensation, including whether any employees earn more than $250,000. 

    The form has led to pushback from a variety of business groups. More than 80 associations, including several representing the construction industry, sent a letter to congressional leaders last week, saying that the questionnaire “introduces a confusing and burdensome process” for both borrowers and lenders. The coalition also fears it could “lead the agencies to inappropriately question thousands of qualified PPP loans made to struggling small businesses.”

    Here, Construction Dive talks with certified public accountant Jack Callahan, industry lead of CohnReznick’s construction practice, about the new mandate and how contractors can ensure that their loans are secure.

    What is the necessity questionnaire and which firms will it apply to?
    The Treasury Department and SBA have two different Paycheck Protection Program Loan Necessity Questionnaires: Form 3509 for for-profit borrowers and Form 3510 for nonprofit borrowers.

    The appropriate form must be completed by all companies receiving loans of $2 million or greater. Each questionnaire contains two sections for the borrower to provide details about business activity and to assess liquidity. Information that must be completed includes gross revenue since March 13, mandated shutdowns that affected operations and several questions regarding liquidity.

    What will the information be used for?
    The SBA has indicated that it will use the questionnaire data to evaluate the good faith certification made on the PPP borrower’s application that states that economic uncertainty made the loan request necessary. The questionnaire also reflects the SBA’s effort to maximize program integrity and protect taxpayer resources.

    The completed form is due back to the lender within 10 business days of when the borrower receives it and within five business days after that, the lender servicing the loan is required to upload the form and documents to the SBA PPP Forgiveness Platform. Separately, the lender must input the borrower’s responses to each question into the web form available on the platform.

    Are there any concerns about how to complete it?
    While the forms themselves are straightforward, they will require a lot of information gathering to complete as well as the necessary technology to download the required documentation. I strongly recommend that borrowers review the form and the completed answers with legal, accounting and other key support team members before filing.

    For contractors, the concern clearly is the interpretation of the answers. Construction was deemed to be an essential service in most states, so many contractors did not realize an immediate reduction in volume or liquidity when the pandemic hit. We know that the cycle for construction is different, so the impact of March 2020 historically will not be seen in the contractor’s financial results until 2021.

    Is there an alternative to filling it out?
    The form clearly states “the receipt of this form does not mean that the SBA is challenging that certification.” However, the SBA points out that a borrower’s failure to complete the form and provide required supporting documentation may result in SBA’s determination that the borrower’s organization is ineligible for either the PPP loan, the PPP loan amount or any forgiveness amount claimed. The SBA may then seek repayment of the loan or pursue other available remedies.

    Do companies have to complete the forms in order to get forgiveness?
    Borrowers with loans of $2 million or greater will need to complete the form whether they are seeking forgiveness or not. They will be required to evidence the filing of this form before forgiveness will be granted.

    As noted above, the form will be required even if the borrower is not seeking forgiveness as the form provides verification of the application certifications and calculations.
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