Stoll Keenon Ogden PLLC | Advertising Material
January 5, 2020
Brad S. Keeton
Member, Stoll Keenon Ogden PLLC
Samuel T. Reinhardt
Attorney, Stoll Keenon Ogden PLLC
In March 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which included a $2 trillion stimulus package referred to as the Paycheck Protection Program (“PPP”). Pub. L. 116-136. Under the PPP, the federal government provided eligible small businesses, individuals, and nonprofit organizations with relief funds in the form of loans that would be fully forgiven if the funds were used in accordance with the provisions of the CARES Act. As part of the PPP loan application process, borrowers were required to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
In October 2020, the U.S. Small Business Administration (“SBA”) circulated loan necessity questionnaires to PPP borrowers who, together with their affiliates, received PPP loans in excess of $2 million. The questionnaire states that its purpose “is to facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the good-faith certification [the borrower] made on [its] PPP Borrower Application that economic uncertainty made the loan request necessary.” The nine-page questionnaire contains a liquidity and business activity assessment, and seeks detailed information about shutdown orders, quarterly revenue, capital expenditures, dividend payments, and whether any employees earned more than $250,000.
Last month, the Associated General Contractors of America, Inc. (“AGC”), the leading trade association in the construction industry, filed a lawsuit in the United States District Court for the District of Columbia challenging the legality of the questionnaire and seeking an order prohibiting the SBA and the U.S. Office of Management and Budget (“OMB”) from basing a decision to deny an application for PPP loan forgiveness, or challenging a borrower’s economic uncertainty certification, solely or exclusively on the information that a borrower provides to the SBA in response to the questionnaire. See generally, First Amended Complaint for Declaratory and Injunctive Relief, AGC v. SBA, et al., Civil Action No. 1:20-cv-03567, (D.D.C. Dec. 9, 2020).
The AGC contends that the questionnaire is “flawed because it focuses on the wrong timeframe for evaluating a borrower’s need for a PPP loan and the borrower’s good faith certification that economic uncertainty at the time of the application necessitated the business need for the loan.” For example, the questionnaire asks for a comparison of second quarter 2020 revenue to the same period of 2019 as well as a detailed assessment of the borrower’s financial standing since March 2020 through production of current bank statements and other data. The AGC argues that these types of questions are “misguided” as any circumstances that post-date the certification should have no bearing on evaluating the borrower’s good faith statement at the time it made the certification.
Although in its early stages, we are closely monitoring this litigation and will report on any future developments. In the meantime, if you have any questions or concerns about this litigation, the Loan Necessity Questionnaire, or the PPP Loan Program, please contact your attorneys at SKO.
Stoll Keenon Ogden understands that these are trying times for our clients and our country. Our firm operations have continued uninterrupted and our attorneys are equipped to serve as we always have – for more than 120 years.
If you would like to discuss the Paycheck Protection Program, the Main Street Lending Program, or other business-assistance programs available during the COVID-19 pandemic, please contact SKO’s Jamie Brodsky (502-568-5473) or Brad Keeton (502-568-5439).
Please also be sure to consult the Stoll Keenon Ogden Coronavirus Resource webpage for additional articles and information related to the latest information on new laws and directives enacted by federal, state, and local governments in response to the Coronavirus pandemic.