On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enactment Act. The law provides an additional $484 billion for COVID-19 relief, focusing primarily on small businesses and health care. The law also expands eligibility for disaster loans to agricultural enterprises.
The SBA Paycheck Protection Program (PPP) is designed to provide a direct incentive for small businesses to keep their workers on the payroll during this unprecedented time. If your business has been affected by COVID-19, you could be eligible for the SBA PPP loan.
Since time is of the essence, we encourage you to contact one of our lenders as soon as possible to inquire about your eligibility. The information out there about the PPP and other funding options can be overwhelming, and we are here to guide our small businesses and agricultural producers and help them not only survive this trying time, but thrive for years to come.
If you haven't applied yet and are interested, view the Application Guide below to view the documents needed to begin processing your application!
As an SBA Approved Lender, our team is prepared to assist your business and committed to being a source of strength and helping families and businesses get through this challenging time.
April 27, 2020 SBA PPP Funding Update from Our President
The SBA Paycheck Protection Program (PPP) provides 8 weeks of cash flow assistance. These loans are 100% federally-guaranteed and will be granted until June 30, 2020. These loans may be forgiven if the borrowers maintain their payroll or restore their payrolls afterward.
Please be prepared to provide your average monthly payroll as defined by the SBA and provide proof of payroll information, e.g., 2019 W-3, 2019 IRS Quarterly 940, 941, or 944 payroll tax reports, 2019 Personal Tax Returns and Business Tax Returns.
You are eligible to apply if you meet the following criteria:
- Your business is not a governmental entity
- You have an existing Farmers State Bank Business Checking Account that has been active since February 15, 2020
- You're authorized to borrow on behalf of the business
- Your business hasn't applied for a loan under the Paycheck Protection Program with Farmers State Bank or any other financial institution
The loan may be eligible for forgiveness, but only amounts meeting SBA criteria:
- Forgiveness is not automatic. You may request forgiveness of some or all of the principal balance of the loan
- Forgiveness is only available if you use the funds for certain purposes as permitted by the SBA
- If you request forgiveness, you must provide documentation and must certify that the loan funds were used for SBA qualifying purposes.
- The amount forgiven may be subject to certain limitations and reductions in certain circumstances; for example, if you have reductions in the number of employees or employee compensation and only 25% of the forgiven amount may be for non-payroll purposes.
- The borrower will be responsible, under the loan, for any amounts not forgiven and will become payable with monthly payments of principal and interest
- The SBA may limit the time frame by which you will need to ask for forgiveness
If you are considering the Paycheck Protection Program, we recommend you review the following documents in addition to the ones above:
PPP-Updated FAQs (May 6, 2020)
PPP-Beneficial Ownership Documentation
Small Business Guide & Checklist
Independent Contractor's Guide
Here are questions you may be asking – and what you need to know:
You are eligible if you are:
- A small business with fewer than 500 employees
- A small business that otherwise meets the SBA’s size standard
- A 501(c)(3) with fewer than 500 employees
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- A Tribal business concern that meets the SBA size standard
- A 501(c)(19) Veterans Organization that meets the SBA size standard
What Will Lenders Be Looking For?
In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.
Lenders will also ask you for a good faith certification that:
- The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
3. Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)
If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.
What Lenders WILL NOT Look For
that the borrower sought and was unable to obtain credit elsewhere.
a personal guarantee is not required for the loan
no collateral is required for the loan
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.
How do I calculate my average monthly payroll costs?
INCLUDED Payroll Cost:
- For Employers: The sum of payments of any compensation with
respect to employees that is a:
- salary, wage, commission, or similar compensation;
• payment of cash tip or equivalent;
• payment for vacation, parental, family, medical, or sick leave
• allowance for dismissal or separation
• payment required for the provisions of group health care benefits, including insurance premiums
• payment of any retirement benefit
• payment of state or local tax assessed on the compensation of the employee
- For Sole Proprietors, Independent Contractors, and Self-Employed
Individuals:
The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.
EXCLUDED Payroll Cost:
- Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
2. Payroll taxes, railroad retirement taxes, and income taxes
3. Any compensation of an employee whose principal place of residence is outside of the United States
4. Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–
5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act
NON SEASONAL EMPLOYERS:
Maximum loan = 2.5 X Average total monthly payroll costs incurred during the year prior to the loan date
For businesses not operational in 2019:
2.5 X Average total monthly payroll costs incurred for January and February 2020
SEASONAL EMPLOYERS:
2.5 X Average total monthly payments for payroll costs for the 12-week period beginning February 15, 2019 or March 1, 2019 (decided by the loan recipient) and ending June 30, 2019
Will This Loan Be Forgiven?
Borrowers are eligible to have their loans forgiven.
How Much?
The loan may be eligible for forgiveness, but only amounts meeting SBA criteria:
- Forgiveness is not automatic.
- You may request forgiveness of some or all of the principal balance of the loan Forgiveness is only available if you use the funds for certain purposes as permitted by the SBA
- If you request forgiveness, you must provide documentation and must certify that the loan funds were used for SBA qualifying purposes.
- The amount forgiven may be subject to certain limitations and reductions in certain circumstances; for example, if you have reductions in the number of employees or employee compensation and only 25% of the forgiven amount may be for non-payroll purposes.
- The borrower will be responsible, under the loan, for any amounts not forgiven and will become payable with monthly payments of principal and interest
- The SBA may limit the time frame by which you will need to ask for forgiveness
- The loan forgiveness cannot exceed the principal.
How could the forgiveness be reduced?
The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Specifically:
What if I bring back employees or restore wages?
Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020, the borrower eliminates the reduction in employees or reduction in wages.
DISCLAIMER:
Any loan made under the SBA's Paycheck Protection Program must be submitted to and approved by the SBA. There is limited funding available and so all applications submitted will not be approved and funded by the SBA. Farmers State Bank is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. However, Farmers State Bank anticipates high volume and there may be processing delays and system failures along with other issues that interfere with Farmers State Bank taking your application or submission of any application to SBA. Farmers State Bank does not represent or guarantee that it will take your application or submit any applications taken before SBA funding is no longer available or at all. By using Farmers State Bank to seek a Paycheck Protection Program loan, you agree that Farmers State Bank is not responsible or liable to you (i) if your application is not taken by Farmers State Bank or any application is not submitted to the SBA until after SBA stops approving applications, for any reason or (ii) if your inquiry or any application is not processed. You also forever release and waive any claims against Farmers State Bank concerning failure to obtain a loan. This release and waiver applies to but is not limited to any claims concerning Farmers State Bank's (i) pace, manner or systems for processing or prioritizing your inquiry or any resulting applications, or (ii) representations by Farmers State Bank regarding the application process, the Paycheck Protection Program, or availability of funds. Participation in the SBA Paycheck Protection Program is subject to confirmation and review of payroll and financial information. Farmers State Bank will not pay fees to or otherwise compensate anyone acting as an agent of the business for advising on or assisting in the preparation of the Paycheck Protection Program application or otherwise. This release and waiver supersedes any prior communication, understanding or agreement on the issues set forth herein.