Latest Updates on the Paycheck Protection Program
IMPORTANT NOTICE: The following FAQs are based on the provisions of the CARES Act as implemented and interpreted by the U.S. Small Business Administration (“SBA”) and the U.S. Treasury Department (“U.S. Treasury”) through interim and final regulations, FAQs, and regulatory guidance and interpretations. The SBA and U.S. Treasury continue to issue new regulations, FAQs and guidance that in some cases changes or conflicts with prior guidance. The eligibility of a PPP loan for forgiveness and the amount and timing of any forgiveness will be subject to and dependent on approval pursuant to the regulations, FAQs and guidance in effect at the time a request for forgiveness is processed and as a result, we cannot provide you any assurances regarding forgiveness of your loan until such approval is received and any review or audit by the SBA completed. The information provided herein is not intended to constitute legal advice.
How the SBA Will Review Borrowers’ Required Good-Faith Certification - May 13, 2020
Today the U.S. Treasury released an additional FAQ (#46) regarding the Paycheck Protection Program.
FAQ #46 - Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,1 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.
In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form.
If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.
SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.
Employee Retention Credit Eligibility after return of PPP Loan by May 14, 2020 - May 6, 2020
Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit? Answer: Yes. An employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an eligible employer for purposes of the credit.
Extension to Return PPP Funds - May 5, 2020
The SBA is extending the safe harbor date for repayment of PPP funds from May 7, 2020 to May 14, 2020 by borrowers that have concerns about their prior certification that economic uncertainty made their loan request necessary to support ongoing operations. Borrowers do not need to apply for this extension. Borrowers who determine that they have other adequate sources of liquidity that are not detrimental to business operations may return the PPP funds by May 14, 2020 and will be deemed by the SBA to have made their prior certification in good faith. The SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
AGENT FEE ACKNOWLEDGEMENT: At the time you submitted your PPP loan application with us, each borrower certified as follows:
You acknowledge that the bank provided the forms and necessary information to complete your Paycheck Protection Program Application. By filing an application with us, you further certify that no agent (attorney, accountant, consultant, etc.) was utilized in the completion of your application. You further acknowledge and agree that we will not process any application or close any loans if an agent seeking payment for services has been utilized and that you will inform any persons you have consulted with regarding your application of this requirement.
Previous Updates on the Paycheck Protection Program. Click a Headline Below.
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Employee Refuses Rehire - May 5, 2020
Employee Refuses Rehire - May 5, 2020
If a borrower (employer) offers to rehire an employee at the same wages and number of hours and the employee declines the offer of employment, the borrower (employer) may exclude the laid-off employee from the forgiveness reduction calculation and that might otherwise reduce the borrower’s loan forgiveness amount if its full-time equivalent employees decrease from the level at February 15, 2020 and are not rehired by June 30, 2020. The borrower must have made a good faith written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower.
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Reduction in Forgiveness Due to Reduction in Employees or Wages - April 29, 2020
Reduction in Forgiveness Due to Reduction in Employees or Wages - April 29, 2020
The total amount of your loan that may otherwise be forgiven may be reduced if you have a Reduction in Employees or Reduction in Salary or Wages, each as further described below, during the period beginning on February 15, 2020 and ending on April 26, 2020. This is in effect a penalty in that it may reduce your forgiveness amount beyond the reduction you might already incur if your monthly payroll costs for the 8 weeks after the date your loan is disbursed are less than the amount used to calculate your eligible loan amount.
Note: The SBA has not yet issued complete rules and guidance on potential reductions in forgiveness and as a result, the specific requirements described below may change.
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PPP Applications Update - April 29, 2020
Paycheck Protection Program Update - April 29, 2020
We are not sending additional new applications for the SBA Paycheck Protection Program at this time.
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PPP Applications Resume - April 27, 2020
Paycheck Protection Program - April 27, 2020
The SBA will resume taking applications for the Paycheck Protection Program on Monday, April 27, 2020 at 10:30 am EDT.
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PPP New Funding - April 24, 2020
Paycheck Protection Program New Funding - April 24, 2020
$310B of additional funding was appropriated to the SBA Paycheck Protection Program on April 24, 2020
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Economic Uncertainty Certification – New Guidance Issued - April 23, 2020
Paycheck Protection Program: Economic Uncertainty Certification – New Guidance Issued - April 23, 2020
On April 23, 2020, The U.S. Treasury Department issued an update to its PPP Frequently Asked Questions (FAQs), specifically addressing an applicant’s certification of necessity. Click here for additional details.
This guidance was issued under the FAQ: “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?” However, the Treasury Department gave no guidance as to when a company might be considered “large” nor did it suggest that the criteria would only be applicable to large companies, however this may be defined in the future.
Although this occurred after the initial round of funding was depleted and $349 billion in loans already approved, it is apparent that the U.S. Treasury Department intends this guidance to apply to loans that have already been approved and funded.
If a PPP applicant, including one that already has an approved loan, did not specifically consider alternate sources of liquidity in connection with their initial application, they should do so. If other sources of liquidity are or were available to the applicant, then some assessment should be made as to whether these other sources are significantly detrimental to the applicant’s business.
This guidance does not require an applicant to demonstrate that they were unable to obtain credit elsewhere, but rather support their application certification that a PPP loan is necessary to support ongoing operations.
Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith, even if they now conclude that there were other sources of liquidity available to it that were not significantly detrimental.
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PPP Funds Depleted - April 16, 2020
Paycheck Protection Program Funds Depleted - April 16, 2020
The SBA announced that the $350B of funds allocated to the Paycheck Protection Program have been depleted.
We are unable to accept requests to apply for the Paycheck Protection Program or submit any additional applications for the Paycheck Protection Program to the SBA at this time.
If you have previously submitted an electronic application to us, we will send you an email communication regarding the status of your application.
We will communicate via email and our website, if and when, we are able to accept additional applications, although this will require additional action by the government to enhance and expand the PPP loan program.
On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, representing one of the largest emergency aid and economic assistance programs ever adopted. Although guidelines on the implementation of the CARES Act have not yet been shared with financial institutions, we recognize the importance of communicating information about the CARES Act, and how it could potentially assist you and your business.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act Programs
- Paycheck Protection Loan Program
- SBA Loan Payment Subsidies and Payment Deferrals
- Emergency Economic Injury Disaster Loans
- Coronavirus Stabilization Act Loans
- Multi-Family Mortgage Forbearance
Paycheck Protection Loan Program
The following is a summary of certain provisions in the CARES Act. Before taking any action regarding the CARES Act, we recommend you consult with your financial, tax and legal advisors as appropriate.
Information
- New $349 billion US Small Business Administration (SBA) loan program for businesses with no more than 500 employees impacted negatively due to the COVID-19 outbreak
- The SBA has stated that businesses with more than 500 employees will qualify if they otherwise meet size standards. The following page contains a link to the list of size standards and a size standards tool: sba.gov/size-standards.
- Expanded SBA loan eligibility
- Incentivizes businesses to retain employees and rehire any employees already laid off or furloughed due to the COVID-19 outbreak
- Program period from February 15, 2020 through June 30, 2020
Benefits
- Loans for qualified costs related to employee compensation and benefits, including (i) payroll costs, (ii) continuation of health care benefits, (iii) employee compensation (of those making less than $100K), (iv) mortgage interest and scheduled principal payment obligations, (v) rent, (vi) utilities and (vii) interest on debt incurred before the covered period
- Maximum loan based on employee salary formula, but not more than $10 million
- Interest rate is currently set at 1.00%.
- Principal, interest and fees deferred for 6 to 12 months from origination date
- No SBA Fee
- 2-year term from date borrower applies for loan forgiveness
- All or a portion of the loan may be forgivable in an amount equal to the amount spent during an 8-week period after the origination date on (i) rent, (ii) payroll costs for workers making less than $100K, (iii) interest on a mortgage, and (iv) utility payments
- Incentivizes businesses to retain and rehire employees laid off or furloughed due to the COVID crisis by reducing the amount forgiven proportionally by any reduction in employees retained compared to the prior year
- Loan forgiveness under this program will not be included in gross income for federal income tax purposes
- Loans made by lenders locally using delegated authority
General Eligibility
- Businesses that employ no more than 500 employees (or a greater number based on the size standard applicable to the industry)
- Certain businesses in the Accommodation and Food Services Industry (NAICS Code 72) may be eligible if they have no more than 500 employees per physical location. In most cases, the number of employees is counted together with all affiliates.
- Expands the type of eligible businesses and includes non-profits
- Business was operational on February 15, 2020, and had employees for whom it paid salaries and payroll taxes, or paid independent contractors
- Waives the credit available elsewhere, personal guaranty and collateral requirements
- Borrower certification of satisfaction of program requirements and economic hardship
Next Steps
- Federal regulations required to fully assess eligibility and complete applications
- Development of specific loan terms and documents
- Establishment of criteria for eligible lenders in addition to SBA approved lenders
- Lender adoption of procedures to process applications
SBA Loan Payment Subsidies and Payment Deferrals (Not available for Non-Profits)
The following is a summary of certain provisions in the CARES Act. Before taking any action regarding the CARES Act, we recommend you consult with your financial, tax and legal advisors as appropriate.
Information
- SBA payment deferral of up to 6 months of principal, interest and fees for eligible SBA loans Waiver of limits on maximum maturity for eligible loans given deferral and extended maturity in the year following enactment of the CARES Act.
- PLEASE CONTACT YOUR LENDER IF YOU CURRENTLY HAVE AN SBA LOAN TO DISCUSS ELIGIBILITY AND PAYMENT PROCEDURES
Benefits
- SBA pays the principal, interest, and fees owed for loans in regular servicing status, whether on deferment or not, that were made before the enactment of the Act for the 6-month period following the next payment due date, and for any such loans that were made within 6 months after the date of enactment of the CARES Act, six months from the date the first payment is otherwise due
- SBA shall make payments to the lender not later than 30 days from when the first eligible payment is due and those payments shall be applied such that the borrower is relieved of any obligation to pay that amount
- Waiver of limits on maximum loan maturity for loans given deferral and extended maturity during the year following enactment of the CARES Act
General Eligibility
- SBA §7(a) Loans and loans made by an intermediary using §7(a) loans or grants
- Currently no apparent application requirement Paycheck Protection Loans and EIDLs are not eligible
Next Steps
- Federal regulations to establish program procedures SBA establishment of lender payment procedures
- PLEASE CONTACT YOUR LENDER IF YOU CURRENTLY HAVE AN SBA LOAN TO DISCUSS ELIGIBILITY AND PAYMENT PROCEDURES
Emergency Economic Injury Disaster Loans (“EIDLs”)
The following is a summary of certain provisions in the CARES Act. Before taking any action regarding the CARES Act, we recommend you consult with your financial, tax and legal advisors as appropriate.
Information
- EIDL disaster relief loan program provides small businesses with working capital loans of up to $2 million to help overcome the temporary loss of revenue they are experiencing
- Available to eligible small businesses in all U.S. States and Territories in response to the COVID-19 outbreak
- Provides for advances of up to $10,000 within three days of applying
- Program period between January 31, 2020 and December 31, 2020
Benefits
- EIDL disaster relief loans in all U.S. States and Territories in response to the COVID-19 outbreak
- May request an advance of up to $10,000 within three days after the SBA receives an application (subject to verification of program eligibility) and is not subject to repayment, even if the loan request is ultimately denied
- Loan proceeds for use to pay paid sick leave due to COVID-19, payroll, increased costs due to supply chain disruption, mortgage and rent payments and other obligations that cannot be met due to revenue losses
- Waives the requirement of personal guarantees for loans up to $200,000, the requirement that the applicant must be in business for a year (but must be in operation on January 31, 2020), and the credit elsewhere test
General Eligibility
- Businesses with no more than 500 employees
- Expands the type of eligible businesses and includes non-profits
- May be approved solely on the bases of credit score or by use of alternative methods to gauge the applicant’s ability to repay
Next Steps
- Federal regulations required to fully assess eligibility and complete applications
Multi-Family Mortgage Forbearance
The following is a summary of certain provisions in the CARES Act. Before taking any action regarding the CARES Act, we recommend you consult with your financial, tax and legal advisors as appropriate.
Information
- Up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship
Benefits
- The opportunity to defer payments due to COVID-19 related hardship for 30 days with extensions for an additional 60 days
- Not obligatory and forbearance can be revoked
General Eligibility
- Mortgages on real property designed for five or more families that are purchased, insured, or assisted by Fannie Mae, Freddie Mac, or HUD
- May not evict or charge late fees to tenants for the duration of the forbearance period
Next Steps
- Federal regulations to establish program procedures Submit a request for forbearance
- If you have a multi-family mortgage with us and would like to make a request for forbearance, please click here
1For purposes of this safe harbor, a borrower must include its affiliates to the extent required under the interim final.