The process, which now requires borrowers to answer a questionnaire, could unfairly disqualify contractors from receiving forgiveness and possibly revoke the loan, according to the lawsuit filed December 8 in U.S. District Court. The suit was brought by the Associated General Contractors against the U.S. Small Business Administration and the U.S. Office of Management and Budget.
At the heart of the dispute is a questionnaire the SBA is requiring borrowers of over $2 million to fill out to determine whether they were eligible for the loans and for forgiveness, according to the suit. AGC says the nine-page “Loan Necessity Questionnaire” focuses only on borrowers’ current financial conditions and not those faced at the time the loan program was implemented in March and later added to in April through Covid-relief passed by Congress.
“This contradiction is deeply troubling to many borrowers because their success or failure over the balance of 2020 could not possibly have been knowable in those early days of the pandemic when the economy was headed into a tailspin,” the suit reads.
The Paycheck Protection Program was designed to encourage small businesses to keep workers on the payroll during the historic economic downturn caused by the pandemic. Companies that received the two-year, 1-percent-interest loans could have them forgiven if the money was spent on eligible expenses, such as employee pay and health care.
Because of the rapid need for the loans, application was designed to be simple, only requiring that the business had been in operation by February 15, had employees it pays payroll taxes for and that it certify that “uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” Contractors were among the sectors receiving the most loans.
In the ensuing months after the program was implemented, accusations of fraud surfaced and also that money was going to large companies. The SBA began clamping down. To date, more than 80 people have been accused of scamming the program, according to The New York Times.
