As anticipated, the Small Business Administration (SBA) issued guidance regarding the review of Payroll Protection Program (PPP) loans totaling $2 million or more. Affected PPP recipients will be required to complete a questionnaire and provide documentation that supports and substantiates the good-faith certification borrowers were required to make on the original PPP Loan Application.
The original loan application required borrowers to certify that as of the date of the application, “economic uncertainty made the loan request necessary to support ongoing operations.”
This questionnaire addresses the “uncertainty” and the “necessity” of the loan, which differs from the substantiation of eligible expenses in the loan forgiveness application.
The questionnaire collects information that allows the SBA to assess the impact of the COVID-19 National Emergency Declaration issued by President Trump on March 13, 2020 on gross revenue and the alteration of normal business operations during the specific covered period. Operational questions address the mandated state restrictions, voluntary responses, disruptions and additional costs as a result of the Declaration.
Additional information regarding liquidity of the business and the use of any funds for discretionary distributions; compensation in excess of $250,000 (annualized); pre-payment of debt; or capital improvements during the covered period is required.
It is highly important that this questionnaire be answered thoughtfully and accurately in order to articulate the uncertainty and necessity of the loan. It is also prudent to evaluate the selection of the covered period, financial decisions made during those periods and the timing of your loan forgiveness application.
If you have not already, we recommend preparing a written narrative to document the uncertainty in your industry and the community, as well as its impact on each area of operations – i.e. sales, supply chain, overhead, workforce, etc. This, along with the completed questionnaire, will act as support for your original certification.
Please reach out to your Somerset Advisor for assistance and applying this new guidance to your unique situation. If you currently do not work with Somerset, now is a great time to become acquainted. You may contact us at 317.472.2200 or with any questions. As always, we are here and ready to help.