Financial Affairs

Letters signed by AICPA raise concerns over PPP loan necessity questionnaires

The AICPA was among 82 organizations that signed a pair of letters expressing concerns about the new Paycheck Protection Program loan necessity questionnaires, which require PPP borrowers with loans of $ 2 million or more. plus complete a new form and provide complete documentation to support their request for relief funds.

In the two letters sent to Congress leaders and to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza, AICPA and other signatories recommend that agencies temporarily suspend the use of questionnaires (SBA Forms 3509 and 3510) while working with the group to “collectively address these issues and work together towards a better solution”.

The coalition, which represents millions of American workers and small businesses, suggested that existing PPP pardon requests – in particular, SBA forms 3508, 3508EZ and 3508S – should continue to be used because they allow “agencies to” review, in detail and prior to approval of the loan cancellation, the relevant facts to ensure that the PPP loan funds were used as Congress intended. “

The organizations also recommended that if agencies need more information about the need or suitability of a PPP loan, they ask the borrower to provide a narrative statement and any documentation the borrower deems appropriate for. demonstrate that the loan was essential to support its ongoing operations. .

“We strongly believe that the vast majority of small businesses needed their PPP loan to stay in business and retain employees, and many still need additional financial support,” said Erik Asgeirsson, President and CEO of, AICPA’s business subsidiary, in a statement. A press release. “These ongoing changes and new requirements could impact future business decisions regarding the request for additional relief.”

In the letters, the AICPA and other signatories identified political and operational concerns regarding the new forms, including the following:

  • The questionnaires focus on the wrong time period during which the PPP loan needs to be appraised. They are looking for gross income comparisons between the second quarter of 2020 and the second quarter of 2019 and other metrics and stories that describe how the borrower performed during the pandemic. However, borrowers were required to certify in good faith that the loan was required at the time of application. “Any circumstances that have occurred after certification and throughout the pandemic should not affect the assessment of the borrower’s good faith statement at the time of certification,” the letters say.
  • The new forms ask for data on cash and income, which could expose the personal finances of small business owners. The letter specifies that “[t]The CARES law did not include a resource-based test, income reduction test, liquidity test or any other measure to assess the financial situation in order to prioritize PPP loans to certain borrowers by compared to others.
  • Questions on income and liquidity data point to a bias against PPP borrowers who survived or remain profitable during the pandemic. Stable or increased income with healthy cash flow and continued employment is a sign that the PPP loan has been successful.
  • Other questions raise concerns that a borrower’s response could lead to an ill-informed analysis by agencies; for example, requests for statements as to whether the closures or changes in operations were mandatory or voluntary and details of the government jurisdiction that mandated the closures.
  • Questionnaires apply inconvenient compliance deadlines to borrowers and lenders, which would be impossible in many cases. “The nine-page questionnaire demands a level and type of reporting never required of borrowers by law or in any PPP lending process to date,” the letters read.

More than 5.2 million PPP loans totaling $ 525 billion were approved in the five months the program accepted requests for assistance. About 30,000 of the loans were $ 2 million or more, according to the SBA report.

PPP in brief

Congress created the PPP under the $ 2 trillion CARES Aid, Relief and Economic Security (CARES) Act, PL 116-136. The legislation allowed the Treasury to use the SBA’s Small Business Loan Program 7 (a) 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 are eligible for loan cancellation if the proceeds are used to pay certain eligible costs.

The program ceased accepting nominations on August 8, with nearly $ 134 billion in unspent congressional funds. Allowing certain small businesses to access these funds is part of several PPP proposals that have been discussed between Congress and the White House, but nothing was passed as no agreement was reached on a government bill. Global stimulus linked to COVID-19 in controversial election year.

Congress designed forgivable loans to help support organizations facing economic hardships created by the coronavirus pandemic and help them continue to pay employee salaries. PPP loan recipients may have their loans canceled 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 allocated to non-salary costs, any decrease in employee numbers and decreases in wages or salaries per employee.

AICPA experts discuss the latest news on PPP and other small business support programs at a bi-weekly virtual town hall. The webcasts, which offer CIP credits, are free to AICPA members. Go to AICPA Town Hall Series web page for more information and to register.

the AICPA Paycheck Protection Program Resource Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.

For more information and stories on the coronavirus and how CPAs can handle the challenges of the outbreak, visit JofA‘s coronavirus resource page or subscribe to our email alerts for the latest PPP news.

Jeff drew ([email protected]) is a JofA senior editor.