Paycheck Protection Program (SBA Coronavirus Guidance and Loan Resources)

On Friday, March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, which contains $376 billion in relief for American workers and small businesses. In addition to traditional SBA funding programs, the CARES Act established several new temporary programs to address the COVID-19 outbreak.

One of these programs is the Paycheck Protection Program (PPP). The proved very popular and has been the subject of additional stimulus bills, legal guidance and interim final rules. In the latest development, Congress passed the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). The PPPFA was signed into law on Friday, June 5, 2020 and makes the following amendments to the PPP to provide relief to borrowers:

• Loan repayment terms—The bill extends the minimum loan term for unforgiven PPP loans from two years to five years.

• Payroll costs vs. nonpayroll costs— For forgiveness eligibility, the bill reduces the portion of PPP funds that must be spent on payroll costs from 75% to 60%, and raises the nonpayroll cost limitation from 25% to 40%.

• Covered period extension—The bill extends the covered period during which borrowers must spend the PPP funds to be eligible for forgiveness from eight weeks to 24 weeks from the date of origination of the loan.

• Payroll tax deferment—The bill permits borrowers to defer payroll taxes without being penalized while still remaining eligible for loan forgiveness.

• Extension of rehiring safe harbor—The bill extends the rehiring safe harbor by six months to provide borrowers with additional time to restore payroll levels or rehire employees without facing a reduction in the amount of forgiveness for which they are eligible. The original date was June 30, 2020, and the new date is Dec. 31, 2020.

In addition to the provisions above, the bill provides loan forgiveness eligibility exemptions for borrowers that are not able to rehire an employee or a replacement. There are also exemptions for loan forgiveness eligibility for borrowers that are not able to return to the same level of business due to complying with COVID-19-related orders or circumstances.

Borrowers should review the bill carefully and speak to their lender should they have any questions. In addition, borrowers should direct any questions regarding their PPP loan to their lender.

On Aug. 11, 2020, the SBA published the following answers to frequently asked questions for the PPP. Click here to access the FAQs.

First Draw PPP Loans

Notice: Paycheck Protection Program resumed January 11, 2021 at 9am ET

The SBA, in consultation with the U.S. Treasury Department, reopened the PPP for First Draw Loans the week of January 11, 2021. The SBA is currently accepting First Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map.

Loan details

The PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. First Draw PPP Loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

The SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.

• PPP loans have an interest rate of 1%.

• Loans issued prior to June 5, 2020 have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years.

• Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).

• No collateral or personal guarantees are required.

• Neither the government nor lenders will charge small businesses any fees.

Who may qualify

• The following entities affected by Coronavirus (COVID-19) may be eligible:

• Sole proprietors, independent contractors, and self-employed persons

• Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)

• Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:

  • 500 employees, or

  • That meets the SBA industry size standard if more than 500

• Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

How and when to apply

You can apply for a First Draw PPP Loan until March 31, 2021. SBA is currently accepting First Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map. All new First Draw PPP Loans will have the same terms regardless of lender or borrower.

If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender:

• Paycheck Protection Program First Draw Borrower Application Form (revised 01-08-21)

Click here for more information.

Second Draw PPP Loans

Notice: Paycheck Protection Program resumed January 11, 2021 at 9am ET

The SBA, in consultation with the U.S. Treasury Department, reopened the PPP for First Draw PPP Loans the week of January 11, 2021. The SBA began accepting applications for Second Draw PPP Loans on January 13, 2021. The SBA is currently accepting Second Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map.

At least $25 billion is being set aside for Second Draw PPP Loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.

Loan details

The PPP now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan.

Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Maximum loan amount and increased assistance for accommodation and food services businesses. For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

Who may qualify

A borrower is generally eligible for a Second Draw PPP Loan if the borrower:

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses

• Has no more than 300 employees; and

• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

How and when to apply

You can apply for a Second Draw PPP Loan from January 13, 2021, until March 31, 2021. SBA is currently accepting Second Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map. All Second Draw PPP Loans will have the same terms regardless of lender or borrower.

If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender:

• Paycheck Protection Program Second Draw Borrower Application Form (released 01-08-21)

PPP Loan Forgiveness

First Draw PPP Loan forgiveness terms

First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:

• Employee and compensation levels are maintained

• The loan proceeds are spent on payroll costs and other eligible expenses; and

• At least 60 percent of the proceeds are spent on payroll costs

Second Draw PPP Loan forgiveness terms

Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8 to 24 week covered period following loan disbursement:

• Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan

• The loan proceeds are spent on payroll costs and other eligible expenses; and

• At least 60 percent of the proceeds are spent on payroll costs

How and when to apply for loan forgiveness

A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.

To apply for loan forgiveness:

1. Contact your PPP Lender and complete the correct form:

• Your Lender can provide you with either the SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a Lender equivalent.

• The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements. Your Lender can provide further guidance on how to submit the application.

2. Compile your documentation:

• Payroll (provide documentation for all payroll periods that overlapped with the Covered Period or the Alternative Payroll Covered Period):

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees

  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:

    • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and

    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state

  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount

• Non-payroll (for expenses that were incurred or paid during the covered period and showing that obligations or services existed prior to February 15, 2020):

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts verifying payments, or lender account statements

  • Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments

  • Business utility payments: Copies of invoices and receipts, cancelled checks or account statements

  • This list of documents required to be submitted to the Lender is not all-inclusive.

3. Submit the forgiveness form and documentation to your PPP Lender: Complete your loan forgiveness application and submit it to your Lender with the re­quired supporting documents and follow up with your Lender to submit additional documentation as requested. Consult your Lender for additional guidance and provide requested documentation in a timely manner.

Continue to communicate with your Lender throughout the process: If SBA undertakes a loan review of your loan, your Lender will notify you of the review and the SBA loan review decision. You have the right to appeal certain SBA loan review decisions. Your Lender is responsible for notifying you of the forgiveness amount paid by SBA and the date on which your first payment will be due, if applicable.

Please Note: Recent legislation has eliminated the original requirement to deduct the amount of EIDL Advance you may have received from your PPP loan forgiveness. Additional guidance and updated forms are forthcoming.