AICPA urges SBA and OMB to reconsider PPP Loan Necessity Questionnaires

By Jeff Drew

Responding to an Office of Management and Budget (OMB) and U.S. Small Business Administration (SBA) request for comment, the AICPA sent a letter Wednesday expressing concern that the new PPP "Loan Necessity Questionnaires" (SBA Forms 3509 and 3510) are burdensome and do not represent Congress's intent when it established the Paycheck Protection Program (PPP).

In the letter, the AICPA points out that PPP borrowers were required to make a "good faith certification" of need for the loan at the time of the loan application.

"The CARES Act calls for an eligible recipient to certify that the 'uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient,'" the letter says. "The AICPA's position is that the certification was intended to permit a borrower to self-assess its need for a PPP loan based on the economic uncertainty it was aware of at the time of its loan application. As there was no way to predict how long the global pandemic would last, its severity, or the extent of the financial ramifications on the borrower's operations, borrowers were directed to make their own good faith determination as to whether the loan was necessary to maintain operations."

If the agencies need more information about the necessity or suitability of a PPP loan, the AICPA letter recommends that "they require the borrower to provide a narrative statement and any documentation the borrower believes is appropriate to demonstrate that the loan was critical to support its ongoing operations."

"No one should forget that the purpose of the PPP was to keep people on payroll and tied to their companies," said AICPA President and CEO Barry Melancon, CPA, CGMA, in a news release. "When the PPP became available, companies were fearing the worst, such as not getting paid by clients and not knowing when the economy or market for their goods and services would restart. For the SBA to look back several months later to question the reasons a company took PPP assistance is inappropriate. Borrowers had to decide whether to request the assistance at the start of the pandemic without knowing what the rest of the year would look like."

The new letter comes a week after the AICPA was among 82 trade organizations that signed letters to congressional leaders and Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza suggesting that existing PPP Forgiveness Applications — specifically SBA Forms 3508, 3508EZ, and 3508S — should continue to be used in lieu of the new questionnaires.

More than 5.2 million PPP loans totaling $525 billion were approved during the five months the program was accepting applications for assistance. About 30,000 of the loans were for $2 million or more, according to SBA reporting.

The PPP in brief

Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The legislation authorized Treasury to use the SBA's 7(a) small business lending program to fund forgivable loans of up to $10 million per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities.

PPP borrowers can qualify to have the loans forgiven if the proceeds are used to pay certain eligible costs.

The program stopped accepting applications on Aug. 8 with almost $134 billion of congressionally approved funds remaining unspent. Allowing certain small businesses to access those funds is among several PPP proposals that have been discussed between Congress and the White House, but nothing has been passed, as no agreement has been achieved on a comprehensive COVID-19–related stimulus bill during a contentious election year.

Congress designed the forgivable loans to help support organizations facing economic hardships created by the coronavirus pandemic and assist them in continuing to pay employee salaries. PPP loan recipients can have their loans forgiven in full if the funds are used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

The AICPA's Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA's coronavirus resources page or subscribe to our email alerts for breaking PPP news.

— Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

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