From the Desk of PDCA Contracts & Risk Committee Chair Richard D. Kalson:
"I hope that everyone's week is off to a good start.
As you may remember, the SBA has stated that it will audit all PPP borrowers, who together with a borrower's "Affiliates" (as determined pursuant to SBA regulations), received PPP loans in excess of two million dollars. Part of the audit is to determine whether a borrower had the "ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to their business".
Many clients have been asking whether the SBA has clarified or set any bright line rules regarding liquidity. That answer remains that there are no bright line rules. However, this week the SBA did release the attached two liquidity questionnaires (one for for-profit PPP borrowers and one for not-for-profit PPP borrowers), which will give clients a flavor of the sort of facts the SBA will be reviewing with regard to its liquidity analysis. Most of the questions involve a simple yes or no response, but there are a few questions that require supporting documentation (similar to the application process). Note that the SBA liquidity analysis is not limited to the items addressed in the questionnaire.
Once a borrower applies for forgiveness, the borrower's PPP lender will forward the applicable questionnaire to the borrower. A borrower must complete and return the questionnaire to its PPP lender within 10 days of borrower's receipt. If the application is not returned on time, the borrower risks forfeiting the ability to have its loan forgiven.
As these questionnaires were just released this month, I suspect that it will take a little bit of time for lenders to build the distribution of the questionnaire into their forgiveness process. That being said, I would recommend that if a borrower has already applied for forgiveness it should reach out to its lender representative to enquire about the questionnaire.
Please let me know if you have any questions .
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