Nonprofit PPP Borrowers of $2M or Up Need to Prepare for New Questionnaire

by Matt Petroski
November 19, 2020

The SBA recently released new draft forms for larger PPP loan recipients to provide additional information. Lenders are expected to send the new Form 3509 (for-profit) and Form 3510 (nonprofit) to borrowers that have original PPP loan amounts of $2 million or more. Recipients only have 10 business days to reply.

Although it’s not clear yet how the SBA will use the data in its review, this may be just a first step in data collection as part of the audit process, or a way for the SBA to reduce the depth of audits by filtering out organizations that clearly meet the certification of need based on the questions alone. Overall, the tone of the questionnaire was more specific and comparative to 2019 than many expected.

Below is a summary of the form and considerations for nonprofit organizations (see our blog post for a more detailed discussion of the form and potential impact).

Summary of the Questions



1)     Provide gross receipts, contributions, and expense for Q2 2019 and Q2 2020.

2)     Has the borrower been ordered to shut down by a state/local authority due to COVID?

3)     Has the borrower been ordered to significantly alter its operations by a state or local authority due to COVID, and what were the cash outlays?

4)     Has the borrower voluntarily ceased or reduced operations due to COVID?

5)     Has the borrower voluntarily altered its operations (other than ceasing or reducing operations)?

6)     Did the borrower begin any new capital improvement projects not due to COVID, and what were the cash outlays?


Liquidity assessment

1)     Provide the value of cash, savings, and temporary cash investments as of the last day of the calendar quarter immediately before the date of the borrower’s PPP loan application.

2)     Did the borrower prepay any outstanding debt between 3/13/2020 and the end of the covered period?

3)     During the covered period, were any of the borrower’s employees compensated over $250K annualized? If so, how many employees and what is the total amount of compensation during the covered period of all such employees?

4)     Are there any restrictions on the borrower using net income or cash, savings and temporary cash investments for payroll and other costs?

5)     Does the borrower have an endowment? If so, detail the types and value of each asset in each endowment as of the last day of the calendar quarter before the date of the loan application. Describe any restrictions on the use of the assets.

6)     What was the value of the non-cash investments as of the last day of the calendar quarter before the loan application?

7)     Is the borrower a school, college, or university?


a.      If so, what is the median tuition?

b.      Did the borrower offer financial assistance to students for 2019-2020 due to COVID?

c.      Did the borrower’s revenues from tuition decrease for 2019-2020 due to COVID relative to 2018-2019?

8)     Did the borrower provide health care services?

a.      Provide program service revenue for patient care comparison between Q2 of 2020 and Q2 of 2019.

b.      Did the borrower offer discounts on patient care due to COVID?

c.      Did the borrower receive any other CARES Act funds?


The Takeaway

1)     You should not wait until you receive the questionnaire from your lender to begin completing it. Start preparing now. Hopefully, this will simply be an addendum to supporting documentation and files created in April/May when this issue originally came to the forefront.   Organizations who already documented their rationale for PPP loan eligibility can leverage their initial eligibility documentation to support responses to this questionnaire.

2)     Be prepared to speak to your balance sheet, including endowments, investments, cash and non-cash savings. Describe restrictions on the assets, keeping in mind whether the organization can access those funds for payroll costs or what the impact to the organization of accessing these funds could be even if they are unrestricted.

3)     For schools, the focus seems to be on the tuition impact to the 2019-2020 school year, so be prepared to articulate the impact if tuition wasn’t reduced during that period.

4)     Consider the timing of your loan forgiveness application, as forgiveness is due within 10 months from the end of the organization’s covered period.

5)     Consider how you are booking the loan for financial statement purposes. Some organizations have decided to book the loan as debt until they receive formal forgiveness out of concerns from the questionnaire.

Overall, we suggest you carefully consider the responses with your stakeholders, including the board, counsel, or other advisors. For questions or more information, feel free to contact our experts.

If you have any questions, reach out to our experts.

November 19, 2020

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Matt Petroski, Director, Tax - Armanino
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