The U.S. Small Business Administration (SBA) recently discontinued the use of SBA Form 3509, Loan Necessity Questionnaire (For-Profit Borrowers), and SBA Form 3510, Loan Necessity Questionnaire (Non-Profit Borrowers), to evaluate the certification made by a Paycheck Protection Program (PPP) loan borrower that economic uncertainty made the loan request necessary to support ongoing operations. See further information published July 29, 2021 in Question 69 of the SBA PPP loans FAQ.
Withdrawal of the loan necessity questionnaire requirement does not mean that the SBA is no longer auditing whether borrowers met the forgiveness conditions. As discussed in more detail in our white paper, Borrower’s accounting for Paycheck Protection Program loans, the accounting considerations related to a PPP loan do not end upon forgiveness of the loan by the SBA because whether a borrower truly qualified for a PPP loan and met the conditions necessary for forgiveness of the loan could be audited by the SBA up to six years after it forgives the loan (depending on the amount of the loan and the requirements being audited). To emphasize, the SBA’s forgiveness of a PPP loan does not eliminate the possibility of it auditing the loan and requiring repayment of some or all of the forgiven amount as a result. As such, after the SBA forgives a PPP loan or it has otherwise been derecognized, but while the PPP loan is still subject to audit by the SBA, consideration should be given to the loss contingency guidance in Topic 450, “Contingencies,” of the Financial Accounting Standards Board Accounting Standards Codification both from a disclosure and recognition perspective.
