Paycheck Protection Program (PPP)
Key Point: The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $350 billion of small business “paycheck protection” loans through the SBA 7(a) program. The Paycheck Protection Program and Healthcare Enhancement Act of 2020 provides a second chance for relief to borrowers who were unable to secure loans before funding of the initial program was exhausted. The maximum loan size is $10 million.
Update 8/10/2020
The time has finally come! We will begin accepting PPP loan forgiveness applications tomorrow, Tuesday, August 11.
Each PPP loan customer will receive an email containing a link to their individual application. This email will come from ESFSCMConfigurator@Fiserv.com (generated by SBCP).
There are two applications available to use (SBA Form 3508 and SBA Form 3508EZ), and it is imperative that you read the instructions carefully before choosing your application.
Your application will be pre-filled with many of your loan details and much of your borrower information. You must follow the directions provided to complete your application and upload the required documentation.
Once in your application, you will see a link to a KNOWLEDGE CENTER. This area will provide you a multitude of information and resources that will assist you in completing your application and submitting the proper supporting documentation. If you are unable to find answers to your questions there, your assigned lender’s contact information will be included in the email you receive.
We will start sending out individual emails beginning tomorrow, Tuesday, August 11, and continuing over the next two weeks, beginning with loans funded on April 14, which was the first day of funding. With requirements mandated by the SBA, we are managing the amount of emails that are sent out in order to process applications efficiently. We will continue to send emails over time as your loan funding date and covered period approaches.
As a reminder, the SBA did change its requirement of using your PPP funds from an 8-week period following the date your loan was disbursed (i.e., funded) to an option of up to 24 weeks. SBA also changed the requirement for use of proceeds from a minimum of 75% for payroll to a minimum of 60% used for payroll. Please keep this in mind as you prepare to apply for loan forgiveness.
Congress has once again revised the Small Business Administration’s Paycheck Protection Program (PPP) through amendments made to the CARES Act by the recently enacted PPP Flexibility Act. The newest revisions, signed into law June 5, 2020, modify certain provisions related to the forgiveness of loans made under the PPP, allow recipients of loan forgiveness to defer payroll taxes, and for other purposes, including the following:
Maturity Extended to 5 Years
Loans under the PPP allow for the borrower to request forgiveness of that portion of the loan that was used during a covered period for certain payroll costs and business expenses. For the loan amount not forgiven under the program, the borrower had 2 years to repay the remaining balance. Under the PPP Flexibility Act, the repayment period has been extended from 2 years to 5 years after application of forgiveness.
The applicably of new maturity term is backdated to the enactment of PPP; however, for PPP loans that have already closed, based upon language in the PPP Flexibility Act, WBA believes both lender and borrower need mutually agree to modify the loan maturity term from 2 years to 5 years before the 5-year term will apply to the previously executed PPP loan.
Covered Period Extended
Borrowers were permitted to spend PPP loan proceeds for 8 weeks, beginning on date of loan disbursement. This time period was referred to a the “covered period”. The PPP Flexibility Act has extended the covered period from 8 weeks to 24 weeks; the period cannot go past December 31, 2020. This provision is also backdated to the enactment of PPP, however, a borrower who previously received a PPP loan may elect keep the original 8-week covered period.
The PPP Flexibility Act also corrected a technical issue that was created when Congress added funding to the PPP because original 8-week covered period had run beyond the original June 30, 2020 program termination date. To correct the timing issues, the PPP is now extended to the earlier of December 31, 2020 or the date program funding has expired.
Exemption Based on Employee Availability
New flexibility has been given to determine full-time equivalency (FTEs) for loan forgiveness calculations. During the period beginning on February 15, 2020 and ending December 31, 2020, the amount of loan forgiveness is to be determined without regard to a proportional reduction in the number of FTEs if a borrower, in good faith can document:
- The inability to rehire individuals who were employees of the borrower on February 15, 2020; and
- An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
- Is able to document an inability to return to the same level of business activity as was operating before February 15, 2020, due to compliance with requirements established or guidance issued by Secretary of Health and Human Services, the Director for CDC, or OSHA during a period beginning on March 1, 2020 and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
Percentage of PPP Loan Proceeds on Payroll Costs
Loan proceeds under PPP were to be used for certain expenses with a cap of 25% permitted for use on non-payroll costs during the covered period. The PPP Flexibility Act now allows for up to 40% of PPP loan proceeds to be used on non-payroll costs. For forgiveness, the borrower must now use at least 60% of PPP loan proceeds for payroll costs during the covered period.
Forgiveness Application Filing and Deferral Period
The PPP Flexibility Act requires borrower to apply for forgiveness of a covered loan within 10 months after the last day of the covered period. If borrower fails to file for forgiveness at that time, borrower will be required to make payments of principal, interest and fees, as applicable.
The Act also revised the previously set payment deferral period to coincide with borrower’s application for forgiveness or 10 months after the last day of the covered period if borrower failed to apply for forgiveness.
Payment of Payroll Taxes
The PPP Flexibility Act eliminates the CARES Act exception to now allow a borrower to delay the payment of payroll taxes if the borrower has indebtedness forgiven under PPP
PPP Calculator
- Please use this checklist to begin assembling the necessary documentation.
- Also - Use this Payroll Expense Worksheet to record payroll and include in your document checklist.
- Use this helpful tool to calculate the loan amount correctly by business type.
- Please use this document, provided by the SBA, as a reference for loan applications
- Please use this loan disbursement control sheet to keep track of your expenses.
SBA Economic Injury Disaster Loans
Detailed on the SBA’s site here: https://disasterloan.sba.gov/ela/
Key Point: The SBA is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the coronavirus.
- How much are they for?
SBA Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- What can they cover?
These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
- What are the terms?
The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
- Am I eligible?
Businesses eligible for these loans include, but are not limited to, hospitality providers, recreational facilities, manufacturers, gyms, owners of rental property, restaurants, retailers, and wholesalers.
- How do I get approved?
Loan approval will be based on credit history and a determination by the SBA that the applicant business has the ability to repay the loan. The applicant business must be physically located in a declared county and have suffered working capital losses due to the declared disaster.
- What’s the cost?
Applications are free. Approval time depends on volume, but typically takes 2-3 weeks, and disbursement can take up to 5 days.
For questions, please contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov. For a comprehensive list of resources presented by the SBA, please visit www.sba.gov/coronavirus.
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