Paycheck Protection Program for our Business Customers

There are a lot of changes to the updated PPP including additional funding, new options for second draw loans, a simplified forgiveness process and changes to EIDL advance deductions. To help, we have created an overview that may answer many of your questions.

The CARES Act authorizes the SBA to temporarily guarantee loans under this new 7(a) loan program that will provide $349 billion in funding for eligible businesses to use towards:

Second Draw PPP Loans for Existing PPP Borrowers

Once the application period opens, you may be eligible to apply for a second PPP loan if you:

• are a business, certain type of non-profit organization, veterans’ organization, tribal business, sole proprietorship, independent contractor, or eligible self-employed individual;
• have no more than 300 employees;
• have used, or will use, the full amount of any first PPP loan on eligible expenses before receiving funding for the second loan; and
• can demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same quarter of 2019.
  
  

The SBA has published the Second Draw Application, SBA Form 2483-SD on their website.

First Loans for New PPP Borrowers

Once the application period opens, you may be eligible to apply for PPP loan for the first time if you:

• are a business, certain type of non-profit organization, veterans’ organization, tribal business, sole proprietorship, independent contractor, or eligible self-employed individual;
• have 500 or fewer employees or qualify under other SBA rules; and
• have not previously received a PPP loan.
  
  

Eligible Expenses

PPP loan funds must still be spent on at least 60% of a borrower’s payroll expenses, with the remaining 40% eligible for expenses like rent, covered mortgage interest, and utilities, but expands the types of eligible expenses to include:

• Expenditures for operations: Payment for any software, cloud computing, and other human resources and accounting needs.
• Property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
• Supplier costs: Payments to a supplier pursuant to a contract, purchase order, or order for goods that was in effect prior to taking out the loan and was essential to the recipient'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.
• Worker protection expenditure: Investments in personal protective equipment and other adaptive costs to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.
  
  

Loan Amount Calculation

Generally, eligible borrowers may receive a loan amount up to 2.5 times average monthly payroll costs. However, restaurant and hospitality businesses (assigned to NAICS code 72) can qualify for 3.5 times their average monthly payroll costs on second draw loans. Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020.

Regardless of the type of borrower, the maximum amount of a second draw PPP loan is $2 million, while first loans are still available up to the $10 million maximum from 2020.

Loans are 100% guaranteed by the SBA and forgivable if the proceeds are used for forgivable expenses. Loan amounts will accrue interest at a fixed rate of 1.00% and have a 5-year maturity.

Simplified Forgiveness for Existing PPP Loans

The new legislation simplified the forgiveness process for loans $150,000 or less and added more eligible expenses, including certain property damage costs, supplier costs, and worker protection expenditures as described above.

We are awaiting additional forgiveness guidance and forms from the SBA for loans of $150,000 or less. Additional details will be made available once these guidelines have been issued.

Additional Changes to the PPP Program

• Economic Injury Disaster Loan (EIDL) Advance: New legislation eliminates the requirement that recipients of EIDL advances have their PPP forgiveness amount reduced by the amount of the EIDL advance. Borrowers that previously had PPP forgiveness reduced as a result of an EIDL advance will be made whole.
• EIDL Refinance: EIDLs may be refinanced with a new first or second draw PPP loan.
• Tax Deductibility: The legislation also specifies that business expenses paid with forgiven PPP loans are tax-deductible. Previous IRS guidance stated that such expenses could not be deducted. Borrowers should consult their tax advisor(s) for specific applicability.
• Reapplying for the maximum amount: Some businesses may be eligible to request increases to a PPP loan received in 2020. Additional eligibility rules and guidance from the SBA is expected.
  
  

More information about our PPP efforts, including application details will be added to this page as they become available. You can also reach out to your banker if you have questions and/or would like to learn more about how we can help.

For additional information regarding updates to the 2021 PPP program, please visit: www.sba.gov