PPP Loans: We are ready to help

UPDATE

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UPDATE ON JANUARY 14:

Applications are being accepted and will be processed starting January 15, 2021. The SBA just released a series of forms and guidance for the next round of Paycheck Protection Program.

Updated First Draw Forms

Second Draw Forms

Guidance & Resources

SBA announcement on the PPP launch:

  • The PPP will reopen Monday for new borrowers and certain existing PPP borrowers.

  • Only certain community financial institutions will be able to make first-draw PPP loans Monday and second-draw PPP loans Wednesday.

  • The Economic Aid Act sets aside $15 billion of the new PPP funding for “community financial institutions.”

These announcements follow the SBA's release earlier this week of:

More information is available at the SBA and Treasury PPP pages. 

UPDATE ON JANUARY 7:


SBA Releases Details, Rules for PPP Relaunch

Community financial institutions will be able to submit loan applications for the Small Business Administration’s Paycheck Protection Program for at least two days before other lenders, SBA said as it released interim final rules covering the pending relaunch of the PPP. However, SBA did not announce the date on which it will reopen its portal for applications for the $284 billion round. We will continue to update blog as new information and dates become available.

The dedicated window for community financial institutions is part of SBA’s efforts to ensure businesses that most need PPP funds can get them. While noting that “PPP loans have been broadly distributed across diverse areas of the economy, with 27% of the funds going to low- and moderate-income communities, which is in proportion to their percentage of the population,” the law reauthorizing the PPP set aside specific pools of funds for first-time PPP borrowers, very small businesses and small businesses in LMI neighborhoods, as well as for loans from community financial institutions.

The first interim final rule amends the existing PPP rules to reflect changes made by Congress, including on fees, borrower eligibility, loan amounts, eligible expenses, reliance on borrower certifications and loan increases, as well as a new registration requirement for all lenders. However, “most of this document restates existing regulatory provisions to provide lenders and new PPP borrowers a single regulation to consult on borrower eligibility, lender eligibility and loan application and origination requirements, as well as general rules on increases and loan forgiveness for PPP loans,” SBA said.

Meanwhile, the second rule governs the second-draw loans now available for borrowers with 300 or fewer employees, that saw a 25% or greater revenue drop in 2020 compared to 2019 and that have used the full amount of their first-draw PPP loan. “Second-Draw PPP Loans are generally subject to the same terms, conditions and requirements as First-Draw PPP Loans,” SBA said. The maximum loan amount is $2 million or two and a half months’ worth of average payroll costs, whichever is less. The rule covers several calculations to determine eligibility and loan amounts.

Read the guidance on PPP loan access

Read the IFR amending the PPP rules

Read the IFR on second-draw loans.

UPDATE ON DECEMBER 28:

Congress and the President are nearing the passing into law a new stimulus bill that includes a “second draw” on the popular PPP Loan Program. 

There are still a lot of details forthcoming but below is a summary of what we know about the legislation as it relates to the Second Draw. We will continue to update this blog post with the most up to date information. 

PPP Second Draw Loans

The law authorizes $325 billion for PPP, EIDL and other small business assistance

PPP Second Draw Eligible borrowers:
  • Employ not more than 300 employees. Businesses with multiple locations that are eligible under the initial PPP requirements may not employ more than 300 employees per physical location.
  • Demonstrate at least a 25% reduction in gross receipts in Q1, Q2, or Q3 of 2020 relative to the same 2019 quarter. Applications submitted after January 1, 2021 are eligible to use Q4 of 2020. Note that there is a special timeline for businesses not in business in 2019.
  • Have used or will use the full amount of the first PPP loan
  • Stock is not traded on a national exchange
  • 501(c)(6) are eligible, but any entity for which lobbying comprises more than 15% of receipts or activities is not eligible
  • Business in operation on February 15, 2020.
  • Prohibits eligible entities that receive a grant under the Shuttered Venue Operator Grants from obtaining a PPP loan.
Maximum loan:

2.5 times average monthly payroll or $2 million, whichever is less. Businesses in the restaurant and hospitality industries, NAICS code 72 , are eligible for loans for 3.5 times average monthly payroll.

Interest rate and term:

1.00%, 5 year maturity.

Eligible expenses:

The new proposed bill allows for the following expenses to be considered allowable and forgivable uses of PPP funds. As with round one, 60% of the forgiveness must stem from spending on payroll costs. 

  • Payroll Costs, Mortgage interest, Rent, Utility payments and other operating expenses as defined in PPP Round One

  • Payments for software, cloud computing and other human resources and accounting needs.

  • Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.

  • Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the borrower’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.

  • Personal protective equipment and adaptive investments to help a borrower comply with COVID-19-related federal, state or local health and safety guidelines during the period between March 1, 2020 and the end of the national emergency declaration.

The above expenses are allowed for loans made before, on or after enactment of the act, except in the event that forgiveness has already been obtained. The proposed bill also clarifies that other employer-provided group insurance benefits, such as group life, disability, vision or dental insurance are included in payroll costs.

Simplified Forgiveness Application

The bill creates a simplified application process for loans under $150,000 such that:

  • Borrowers will receive forgiveness if they provide a lender with a one page certification that includes a description of the number of employees the borrower was able to retain because of the covered loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount.

  • The SBA will establish this form within 24 days of enactment of the act.

Key Reforms to Current PPP Loan Program
  • EIDL Advance fix. The law is anticipated to repeal the EIDL Advance deduction of the CARES Act (if you have already received forgiveness with an EIDL deduction the SBA will be reviewing these and making further adjustments).
  • The bill is stating that forgiven PPP loans will not be included in taxable income. In other words, the proposed bill provides that business expense paid with forgiven PPP loan proceeds may be deducted from taxable income. The same tax treatment also applies to EIDL grants and certain loans and loan repayment assistance. 
Please Contact Us with Any Questions

We are proud how we met all our applications in the first draw. We successfully processed applications for over 300+ parties with 0 applications missed, saving over 4,200+ jobs. This included both existing clients of the bank as well as others who were unable to get a timely response from their existing lender.

Our crew is already hard at work preparing to once again assist our community.

 

Legal disclaimer: This email is intended to provide a brief overview of what we currently know. Please continue to monitor and review the program rules as details, and potential changes, are still forthcoming, updates will be provided by the SBA on their website here. Flagship Bank Minnesota is not qualified to provide legal or tax advice. 

On March 27, Congress passed the $2 trillion stimulus bill – the Coronavirus Aid, Relief, and Economic Security (CARES) Act – which will provide significant tax and non-tax stimulus to individuals and businesses. The programs and initiatives are intended to assist business owners with whatever needs they have right now. When implemented, there will be many new resources available for small businesses, as well as certain nonprofits and other employers. A summary of the Act can be accessed here. The Act contains a number of provisions for expanding unemployment payments, including coverage of independent workers who haven't been covered to date. The CARES ACT also calls for the creation of forgivable loan programs for businesses through the SBA.  Check out their website to find out about existing and developing programs.

The Treasury Department issued much-anticipated guidance for the Paycheck Protection Program, which starting this week will provide up to $350 billion in fully forgivable loans to help small businesses maintain payrolls during the COVID-19 pandemic. The loans are fully guaranteed by the Small Business Administration, but the SBA will waive all SBA guaranty fees. PPP loans are made for two years at a 0.5% fixed rate with payments deferred for six months. For more information go to treasury.gov/cares

SMALL BUSINESS PAYCHECK PROTECTION PROGRAM

The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.

Cafe owner smiling at the camera at the cafe

Fully Forgiven


Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Please read the interim rule and Borrower overview from the US Treasury for more details and specific qualifications. 

Must Keep Employees on the Payroll—or Rehire Quickly


Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

All Small Businesses Eligible


Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries.

When to Apply


Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.

How to Apply


Flagship Bank is currently taking applications. Contact us us for more information. All loans will have the same terms regardless of lender or borrower. Additional information and full terms can be found at www.sba.gov.

Documents to have organized for your application:

  • SBA Application Talk with a business lender
  • Payroll statement showing the business was actively paying salaries and payroll tax on 2/15/20
  • 2019 year-end (12 month) payroll statement from payroll processor
  • The payroll statement should provide additional information that identify the employees that receive compensation greater than $100,000 in the year’s period
  • 2019 IRS 941 forms
  • 2019 IRS 944 form
  • Please provide a break-down in dollars for use of requested loan amount:
    • Payroll Costs:Utilities:
    • Mortgage Interest:
    • Rent:
    • Refinance eligible EIDL:
    • Interest on debt incurred before February 15, 2020:
    • Continuation of group health care benefits and insurance premiums:
  • Number of Jobs Created?
  • Number of Jobs Retained?
  • Date Business was established?
  • Articles of Incorporation/Organization
  • By Laws/Operating Agreement
  • Copy of Owners Driver’s Licenses front and back
  • 2018 / 2019 Tax Returns for Documentation and Entity BSA/AML Verification

 

 

 

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