Project Description

Lawsuit Against the Small Business Administration Regarding PPP Loans

In a further response to AGC pressure to restrict the use and ultimately require the Small Business Administration (SBA) to revise its Paycheck Protection Program (PPP) “Loan Necessity Questionnaire” — including the lawsuit that AGC filed against SBA on December 8 — the agency announced in early January that it is providing an additional 60 days for public comment on the questionnaire and “will submit any resulting amendments to the information collection to the Office of Management and Budget (OMB) for approval.”

The questionnaire is a previously secret form that the SBA is now requiring all borrowers of PPP loans over $2 million to complete as they apply for loan forgiveness. The purported purpose of the form is help SBA pass judgment on the certification that all borrowers had to make, at the time they applied for their loans, that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The fundamental problems with the form are that it focuses on the way that the following months actually played out, that it establishes a variety of liquidity and other tests that borrowers could not anticipate – and that it provides little opportunity for borrowers to explain the real reasons for their economic uncertainty.

Following several weeks of quite, but frank communication with federal decisionmakers, AGC filed its lawsuit against SBA in the U.S. District Court for the District of Columbia. The very next day, the SBA issued new guidance on the form, declaring that the agency does not intend to base its decisions solely or exclusively on a borrowers’ responses to the form and that the agency will only decide whether a borrower acted “in good faith at the time of [its] loan application.” The day after that, after months of insisting that it needed to keep the form secret, the SBA officially released the form, posting a copy on the agency’s web site.

Project Details

DATE

December 2020

BENEFICIARY

AGC members that took PPP loans

PROJECT TYPE

Litigation