The SBA 7(a) Paycheck Protection Program (PPP) is meant to help businesses impacted by COVID-19 retain their workforce and assist with operational expenses, such as payroll expenses, employee salaries, mortgage interest, rent, and utilities.
Eligibility: Small businesses with 500 employees or less, including: nonprofits, veteran organizations, tribal businesses, religious organizations, self-employed persons, sole proprietors and independent contractors. Businesses can apply for multiple relief programs.
SBA 7(a) Loan Terms: Applies to the remainder of the loan amount that is not forgiven.
Covered Period: PPP loan amount is intended to cover an 8-week period to apply to a time frame between February 15, 2020 and June 30, 2020.
Loan Forgiveness: Up to 100% of the loan may be forgiven if at least 60% (originally 75%) is used to fund payroll costs through the end of June (forgiveness will be reduced if headcount or wages decrease) AND the remaining 40% is used to pay mortgage interest, rent and utilities. Proceeds used for other business expenses will not be forgiven.
When is the loan forgiven: Loan is forgiven at the end of the covered period after lender completes verification of expenses covered by the loan proceeds. Lender will make a decision within 60 days.
When can you apply for loan forgiveness? Applicants have the option to apply as early as the end of the 8-week covered period beginning the date that you received your PPP loan funds, or opt for a longer covered period of up to 24-weeks after the loan is disbursed, depending on how long of a period you want to use to calculate your forgiveness.
PPP Loan Portal: Designed to better assist customers, our secure PPP Online Portal will guide you through the PPP Loan Forgiveness Application (Form 3508) process. Supporting documentation will also need to be submitted through the PPP Loan portal.
With your PPP Loan Forgiveness Application, you will need to provide:
Step-by-step instructions for the BankFinancial Online Portal can be found in the PPP Form 3508 Instructions.
Next Steps: Once you have submitted your PPP Loan Forgiveness Application, it will be reviewed for accuracy. We will start submitting completed applications to the SBA on 8/17/20. Once the SBA has evaluated your application, we will send you an email with details and final documents for signing.
Please Note: Due to pending legislation, PPP Loan Forgiveness parameters may change, and additional documentation may be required.
For more information on the expenses eligible for forgiveness, and the supporting documentation you will need to submit with your application, please review the Paycheck Protection Program Loan Forgiveness Application on the SBA website.
If you would like to repay your SBA PPP loan, please request a "PPP Loan Payoff Letter" to: PPPClosings@BankFinancial.com.
PPP Flexibility Act Changes
On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) made significant changes to the program guidelines.
Payroll Expenditure Requirement: It was reduced from 75% to 60%, allowing the remaining 40% to be spent on rent, utilities and/or interest on pre-existing debts, to still be eligible for loan forgiveness.
Covered Period: It was increased from 8 weeks to 24 weeks. Borrowers now have 24 weeks to spend their PPP loan proceeds.
Loan Term. The PPP loan term was changed from 2-years to 5-years for PPP loans closed as of June 5, 2020.
Payroll Tax Deferral. Borrowers can defer the employer's share of 2020 payroll taxes even if their PPP loan has been forgiven. Only half the payroll taxes will be due on December 31, 2020, and the remaining half will be due December 31, 2021.
Payroll Level Requirements. Originally, to qualify for maximum loan forgiveness, borrowers had to maintain payroll levels only through the 8-week Covered Period, or qualify under the Restoration Rules, and restore payroll levels by June 30, 2020.
Safe Harbor. (2) exceptions were added, which allows borrowers to still be eligible for full loan forgiveness, even if they were unable to restore their all their full-time equivalent employees.
1) If the borrower can document that they were unable to rehire the individual employed on February 15, 2020 AND unable to rehire similarly qualified employees before December 31, 2020.
2) The borrower was unable to return to the same level of business activity as of February 15, 2020 due to compliance with government issued worker or customer safety requirements related to COVID-19.
Good-Faith Certification Concerning Necessity of PPP Loan
Loans Below $2 Million. The SBA has determined the following Safe Harbor: any borrowers with a PPP loan below $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. Borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment.
Loans Above $2 Million. Borrowers with loans greater than $2 million, will be subject to review by the SBA for compliance with the good-faith certification as set forth in the PPP Interim Final Rules and Borrower Application Form. For more information, please refer to the SBA FAQ.
The SBA continues to make changes and provide additional guidance on the Paycheck Protection Program requirements. For more information on the SBA PPP, please refer to the SBA's FAQ.