COVID-19: SBA Issues New Forms Asking Key Necessity and Liquidity Questions


Borrowers of Paycheck Protection Program (PPP) loans of US$2M or more will be required to complete a new form as part of the Small Business Administration (SBA) review process, which appears to ask key questions about private equity (PE) ownership, market capitalization, quarterly revenue, and COVID-related business impacts that happened after the PPP loan application, and this unhappy question for many of our clients:

After studying the application, it appears that the SBA will be looking not only at the facts that existed at the time of PPP loan application, but also looking at how events actually unfolded for PPP borrowers after the fact. 

We would like to note that the SBA has not, as far as we could find, officially released these forms, but we were able to locate the forms (SBA Form 3509SBA Form 3510Federal Register/Vol. 85, No. 207), through online and other resources, which appear genuine and  consistent with publicly-available information.

So, with the caveat that we do not know for sure that these are accurate or final, here is what we know about the forms, though for now we will focus on the form 3509, which is for business for-profit borrowers:

You can see the questions for yourselves in the forms, but here are some observations on each of the two assessments:

Business Activity Assessment

 Liquidity Assessment

Our enforcement efforts may also include, in appropriate cases, private equity firms that sometimes invest in companies receiving CARES Act funds. When a private equity firm invests in a company in a highly-regulated space like health care or the life sciences, the firm should be aware of laws and regulations designed to prevent fraud. Where a private equity firm takes an active role in illegal conduct by the acquired company, it can expose itself to False Claims Act liability. A pre-pandemic example is our recent case against the private equity firm Riordan, Lewis, and Haden, where we alleged that the defendants violated the False Claims Act through their involvement in a kickback scheme to generate referrals of prescriptions for expensive treatments, regardless of patient need.  Where a private equity firm knowingly engages in fraud related to the CARES Act, we will hold it accountable.

Remember, we cannot be sure that these forms are the official or final forms, but those of you with companies which have US$2 million or more in PPP loans may begin receiving something like this from your banks in the near future. Please share your copies of them if they look different than what we have referenced, and of course, please let us know if we can be of assistance.


Copyright 2024 K & L Gates
National Law Review, Volumess X, Number 307