SBA presses big businesses to justify aid, sparking uproar

The Small Business Administration is quietly rolling out an effort to scrutinize the largest businesses that took payroll support loans during the pandemic, demanding new details about their operations to justify the aid.

The SBA this week began to circulate "loan necessity" questionnaires aimed at companies and nonprofits that took forgivable Paycheck Protection Program loans worth $2 million or more. The agency declined to comment on the forms and issued no public announcement beyond a brief Federal Register notice marking their release, but copies were obtained by POLITICO.

The questions posed by the SBA have rattled banks, which issued the loans and would be responsible for delivering the questionnaires to the agency, as well as accountants for PPP borrowers. They say it's another "gotcha" moment in a program that has been subject to shifting rules and expectations since its hurried launch in April and could create major new complications for businesses that took advantage of the aid. The loans were originally designed to be forgiven if borrowers agreed to maintain payroll.

The new questions for businesses in the nine-page questionnaire — which the SBA said borrowers must complete within 10 business days of receiving it — ask for details on quarterly revenue, capital expenditures, dividend payments and whether any employees earned more than $250,000.

Erik Asgeirsson, president and CEO of CPA.com, said borrowers did not anticipate the questions when they applied for loans in the early days of the program.

"There's going to be a lot of feelings that this is not fair," he said.

The move — made with little explanation by the SBA — is the latest flashpoint in the program as anxiety grows around whether businesses of all sizes will be able to have the loans forgiven as expected.

The Trump administration announced plans to review the loans in late April after Shake Shack, Ruth's Hospitality Group and other well-known publicly traded companies were among the first to receive loans in the program's initial wave, sparking a public backlash as the funding was depleted.

Congress later devoted more money to the program, and it had nearly $134 billion left unused on Aug. 8 when lending authority expired.

In the questionnaire, the SBA said it is reviewing the loans “to maximize program integrity and protect taxpayer resources.” The agency said in the document that the information “will be used to inform SBA’s review of your good-faith certification that economic uncertainty made your loan request necessary to support your ongoing operations.”

Failure to complete the form may cause the SBA to determine that a business was ineligible, and the agency may seek repayment “or pursue other available remedies,” according to the form.

The execution of the review is opening a new rift with banks that were responsible for making the loans and expected that most would be forgiven.

Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, said the new process "could end up being a real mess for lenders and borrowers alike."

He said banks would be responsible for entering businesses' responses into the SBA's system, creating potential risks for mistaken data entry or misunderstanding information supplied by borrowers.

"The process to help the American worker cannot keep being one of 'gotcha' moments," Wilkinson said. "Banks were asked to be the government’s delivery system for PPP—but we keep getting surprised very far into the process with new, previously undisclosed roles for lenders to play. PPP participation becomes a riskier proposition for the lenders and borrowers with every new policy change."

For Wilkinson, it's further evidence that Congress needs to revamp the program if lawmakers want to revive it as part of an economic relief package.

"Unless Congress is clear in a next recovery package that they are taking the reins back on PPP and make holistic, no-cost fixes to smooth out the PPP process, not many lenders will be able to keep participating in any extension or second round of the program," he said.