Large SBA Loans Require SBA Form 3509

Under the Paycheck Protection Program (PPP), borrowers who received a PPP loan in excess of $2 million, whether from a single loan or the combined total (together with affiliates), have known for a while that their loans would receive increased attention from the Small Business Administration (SBA). To that end, the SBA Form 3509 must be submitted for loan amounts of $2 million or greater.

Who Needs To Submit SBA Form 3509?

Many of you have read about or have actually seen the SBA Form 3509, Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers) and SBA Form 3510, Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers) as they are being sent by the SBA to lending banks for distribution to borrowers.

As of December 10, 2020, these forms have now been officially published on the SBA’s PPP website and lender banks on behalf of the SBA, have been requiring borrowers with loan original loan amounts of $2 million or greater ( together with affiliates ) to complete them.

What Is The Purpose of SBA Form 3509?

The purpose of these forms is to facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the borrower's "good-faith certification that economic uncertainty made the loan request necessary to support ongoing operations".

The questionnaires focus on two main areas:

1. Business activity
2. Liquidity

Some of the key business activity questions are as follows:

• What was the Borrowers gross revenue in the second calendar quarter of 2019 versus that of Q2 2020?
• Was the business ordered to be shut down by a state or local authority as a result of COVID-19?
• Has the Borrower voluntarily ceased or reduced operation due to employees contracting COVID-19; disruption of supply chains and if other, to provide a description.
• What were the Borrower's cash outlays for voluntary alterations to safeguard or reconfigure employee workspaces?

Some Liquidity assessment questions are as follows:

• What was the amount of cash and cash equivalents on the last day of the calendar quarter before applying for the PPP loan?
• What was the book value or shareholders' equity value of the Borrower as of the last day of the calendar quarter before applying for the PPP loan?
• Has the borrower prepaid any outstanding loans?
• Has the borrower paid dividends or capital distributions to owners other than for pass-through estimated taxes?
• Were any employees compensated more than $250,000 on an annualized basis?

Submitting Your SBA 3509 Form

As we have already mentioned, PPP loans with an original principal amount of $2 million or greater are expected to be requested to complete this form and submit it to the lender servicing the Borrower’s PPP loan, along with the required supporting documents and borrower certifications.

Once requested, the borrower will have ten business days from the date of receipt to complete the form and return it to the lender. As a best practice, we are advising clients to begin completing and gathering documentation in the event that the form is requested.

A copy of Form 3509 can be found here.

As always MRPR stands ready to assist you with managing your PPP loans and submitting the necessary forms and documentation. Please contact us if you have any questions.