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The top 5 things contractors need to know about the PPP necessity form

Posted on December 10th, 2020

As millions of Paycheck Protection Program (PPP) borrowers begin to fill out their loan forgiveness applications, another form is looming on the horizon. Protection of taxpayer resources and program integrity has been a focus for the Small Business Administration (SBA) and Treasury in recent months, and borrowers of loans that were $2 million or more will be required to fill out the SBA Form 3509 PPP Loan Necessity Questionnaire. According to the SBA, the form is to help certify that the loans were requested in good-faith by borrowers due to the uncertainty of the pandemic’s potential implication on their operation.  

For contractors, this can be a burdensome task but one that many will need to undertake regardless of whether forgiveness will be requested. We’ve put together everything you need to know about this form, including potential challenges specific to the construction industry that you should work through with your CPA. 

PPP necessity form basics for contractors 

  1. The PPP necessity form is required for all businesses that received loans of $2 million or greater whether or not the organization is seeking forgiveness. If you do not complete the necessity form, you run the risk of the SBA determining your organization was ineligible for the loan, or your loan forgiveness could be denied in whole or in part causing the SBA to seek repayment. 
  1. The questionnaire is made up of 9 pages of 21 questions, some with multiple parts. Six of the questions will require supporting documentation. Some examples of questions on the form include: 
  • Gross revenue since March 13, 2020 
  • Mandated shutdowns that affected operations  
  • Voluntary shutdowns or changes in operations 
  • Capital improvement projects started during the loan period that were not COVID-19 related  
  • Cash liquidity during the covered period 
  • Dividend payments made during the covered period 
  • Employee and ownership compensation during the covered period in excess of $250,000 annualized  
  • Certain ownership ties to publicly traded companies  
  • …and more. 
  1. The Form 3509 (and 3510 for nonprofits) will be available through lenders only – not the SBA website. 
  1. The form is time sensitive – Borrowers have 10 days to complete the form after receipt from their lender. As such, the loan necessity form and supporting documentation should be part of your loan forgiveness strategy with your CPA. 

Challenges of the PPP necessity form for contractors  

  1. Since the construction industry has been deemed an essential industry throughout the pandemic, contractors will need to clearly certify that their loan was taken in good faith due to anticipated financial setbacks. However, most financial impacts will not be fully known until 2021 due to the typically longer financial cycle of the construction industry. This can present a challenge for contractors in filling out this form. It is strongly recommended that you work with your CPA to ensure you have appropriate documentation to back up your loan necessity in the case of a challenge of need from the SBA. 

Borrowers of loans of $2 million or more are reminded that the SBA has stated previously that it expects to perform loan necessity reviews for all borrowers with large loans. While several industry groups are currently questioning the potential burden of these questionnaires, they are still required as of this writing. For assistance with your PPP forgiveness application and your PPP loan necessity form, contact us.  


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