NLBMDA Alert: Paycheck Protection Program updates

The National Lumber and Building Material Dealer Association (NLBMDA) reported that the Small Business Administration (SBA) and Treasury Department issued new guidance to its Paycheck Protection Program (PPP) Frequently Asked Questions (Question #53) regarding the Loan Necessity Questionnaire that is being sent to borrowers that took out more than $2 million in PPP loans. 

As the NLBMDA announced last month, the SBA is reviewing all loans of $2 million or more for eligibility, fraud or abuse, and is requiring borrowers to complete a Loan Necessity Questionnaire.

In their guidance, SBA clarifies that a request to complete the Loan Necessity Questionnaire does not mean that SBA is challenging a borrower’s certification that is required by the CARES Act. SBA states that their assessment of a borrower’s certification will be based on the totality of the borrower’s circumstances through a multi-factor analysis. 

The SBA says it will assess whether the borrower had adequate basis for making the required good-faith certification, based on its individual circumstances in light of the language of the certification and SBA guidance. This certification is required to have been made in good faith at the time of the loan application, even if subsequent developments resulted in the loan no longer being necessary.

In its review, the SBA may take into account the borrower’s circumstances and actions both before and after the borrower’s certification to 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. After a borrower submits its completed questionnaire, SBA may request additional information, if necessary, to complete its review.

When additional information is requested, PPP borrowers will have an opportunity to provide a detailed written response to SBA explaining the circumstances that provided the basis for their good-faith loan necessity certification. SBA will make a final determination that a borrower lacked an adequate basis for its loan necessity certification after reviewing any additional information that a borrower chooses to submit.