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Letters signed by AICPA raise concerns over questionnaires on need for PPP loans




The AICPA is among 82 organizations that have signed a pair of letters expressing concerns over the new Paycheck Protection Program Loan Needs Questionnaires, which require PPP borrowers with $ 2 million in loans. or more complete a new form and provide full documentation to support their request for relief funds.

In the two letters, which were sent to Congressional leaders and Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza, the 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 working Americans and small businesses, suggested that existing PPP pardon requests, especially SBA 3508, 3508EZ and 3508S forms, should continue to be used as they allow agencies to review, in detail and prior to the approval of the loan cancellation, facts relevant to ensuring that the PPP loan funds were used in the manner intended by Congress.

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

We firmly 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 CPA .com, the commercial subsidiary of AICPA, in a press release. Release. These ongoing changes and new requirements may impact future business decisions regarding the request for the additional exemption.

In the letters, the AICPA and other signatories identified political and operational concerns with 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 describing how the borrower fared 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 arose after certification and throughout the pandemic should not impact the assessment of the borrower’s good faith statement at the time of certification, according to the letters.
  • The new forms ask for data on liquidity and income, which could expose the personal finances of small business owners. The letter states that [t]The CARES Act did not include a resource-based test, income reduction test, liquidity test or any other measure to assess financial capacity to prioritize PPP loans to certain borrowers over d ‘other.
  • Questions on income and liquidity data indicate a bias against PPP borrowers who survived or remained profitable during the pandemic. Stable or increasing income with healthy cash flow and continued employment is a sign that the PPP loan is successful.
  • Other questions raise concerns that a response from borrowers 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 made the closures mandatory.
  • 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 before required of borrowers by law or in any PPP lending process to date, the letters say.

Over 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 SBA reports.

PPP in brief

Congress created the PPP as part of the $ 2 trillion coronavirus CARES (Aid, Relief and Economic Security) 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 eligible 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 stopped accepting nominations on Aug. 8, with nearly $ 134 billion in unspent congressional funds. Allowing some 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 draft. Comprehensive stimulus bill 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 can get their loans fully canceled 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 attributed to non-salary costs, any decrease in the number of employees and reductions in wages or salaries per employee.

AICPA experts discuss the latest PPP programs and other small business support programs at a virtual town hall every two weeks. The webcasts, which provide CPE 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 Resources Page hosts resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.

For more information and reports on the coronavirus and how CPAs can handle the challenges of the outbreak, visit the JofAs coronavirus resource page or subscribe to our email alerts for the latest P3 news.

Jeff drew ([email protected]) is a JofA editor-in-chief.

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