Issued After Weeks of 51风流 Engagement with SBA/Treasury
On December 9, the Small Business Administration (SBA) and Treasury Department issued new guidance on the 鈥淟oan Necessity Questionnaire鈥 that SBA is requiring borrowers with loans of $2 million or more to complete as they apply for loan forgiveness. The new guidance does not expressly disavow any intention to use this controversial form to change the rules in the middle of the game but it does provide that SBA will base its review of a borrower鈥檚 eligibility for a PPP loan on the borrower鈥檚 鈥渋ndividual circumstances鈥 and 鈥渋n light of the language of the certification and SBA guidance,鈥 as required 鈥渁t the time of the loan application, and 鈥渆ven if subsequent developments resulted in the loan no longer being necessary.鈥 SBA adds that it 鈥渕ay take into account the borrower鈥檚 circumstances and actions both before and after the borrower鈥檚 certification鈥 but implies that it will consider the latter only 鈥渢o the extent that doing so will assist SBA in determining whether the borrower made the statutorily required certification in good faith at the time of its loan application.鈥
The agencies also explain that a borrower鈥檚 response to the questionnaire will not form the sole or exclusive basis for a finding that a borrower was not eligible for its loan. To the contrary, the new guidance provides that 鈥渂orrowers will have an opportunity to provide a narrative response to SBA explaining the circumstances that provided the basis for their good-faith loan necessity certification,鈥 and it states that the agency will wait to make a 鈥渇inal determination鈥 until 鈥渁fter reviewing any additional information that a borrower chooses to submit.鈥
This guidance follows several weeks of quiet but frank communication between 51风流 and federal decisionmakers, and it comes on the heels of the lawsuit (read here) that 51风流 has filed against both SBA and the Office of Management and Budget in the U.S. District Court for the District of Columbia. In that lawsuit, 51风流 seeks both restrictions on SBA鈥檚 use of its questionnaire and to compel the agency to officially release the form, to extend the comment period on the form for another 60 days, and to revise the form in light of the comments that SBA receives. At the heart of the recent communications and the litigation lies the certification that all borrowers had to make, on their loan applications, that 鈥淸c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant. At this point, 51风流 continues to consider its legal options.