AGC continues the questionnaire on the need for a loan

The Associated General Contractors of America (AGC) filed a lawsuit this week against the US Small Business Administration (SBA) and the US Office of Management and Budget (OMB). Filed with the United States District Court for the District of Columbia, AGC officials allege that the means by which SBA developed and deployed a Loan Necessity Questionnaire (Form 3509 for for-profit businesses) violates the ‘Administrative Procedure Act, the Paperwork Reduction Act of 1995 and the Fifth Amendment to the US Constitution.

Revealed in a notice published by the Federal Register On October 26, 2020, Form 3509 is designed to collect additional information for use by SBA examiners to assess data provided on borrower applications for the Paycheck Protection Program (PPP). Developed under the Coronavirus Aid, Relief, and Economic Security Act (CARES), the PPP includes guaranteed loans for eligible small businesses affected by the COVID-19 pandemic. While the SBA required applicants to certify in good faith that the funds requested through the PPP were necessary to support ongoing operations, AGC officials allege that by now basing its underwriting and determinations for Upon remitting the principal on the new questionnaire, the SBA examines circumstances after the date of the original requests, rather than those preceding an expressed need.

“This contradiction is deeply troubling to many borrowers as their success or failure over the remainder of 2020 could not have been experienced in those early days of the pandemic when the economy was heading into a free fall,” suggests the complaint filed by AGC.

Officials further allege that the SBA is “hiding the questionnaire from public view” after obtaining approval from the OMB to release the document through a process that AGC says failed to meet the requirements. of the Paperwork Reduction Act. The form “attempts to establish a means test, an income reduction test and a liquidity test that Congress never considered,” an official press release from the AGC reads, further alleging that the OMB has authorized the SBA to use its form in “the most complete secrecy”, instead of publishing it and providing a 60-day period for public comment. The organization challenges the legality of the questionnaire and the legal adequacy of the development, approval and publication process.

“Using a secret form that ignores the intent of Congress and retroactively changes the criteria for a loan is not due diligence; it is illegal and must end before employers suffer irrevocable harm, ”said Stephen E. Sandherr, CEO of AGC.

While alleged copies of the form are placed on the Internet, the editors of the USGNN ™ were unable to locate an official version on the SBA website. When asked via a press contact, “The form is not available to the public at this time,” confirmed Martin Short, senior economic development specialist and public information officer for the district office of Virginia-Richmond of the SBA.

According to AGC’s legal file, among the information requested via the questionnaire is:

  • Comparisons of second quarter 2020 revenue compared to the same period in 2019;
  • Whether state or local stop orders have been issued in the midst of the pandemic;
  • Information on cash spending for business changes due to closures since March; and
  • Detailed assessments of a borrower’s financial condition since March using bank statements and other data.

“These questions are wrong. At the time of application, the borrower was asked to certify in good faith that economic uncertainty made the loan necessary at that time, ”states the association’s legal complaint, further suggesting that to assess the certifications , “The SBA’s investigation must remain focused on the circumstances at the time of the request.

The association is requesting a restricted use of the information gathered by the questionnaire, as well as a statement that it was developed and deployed illegally, prohibiting its use to assess loan cancellation or certification.

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