PPP Loan Forgiveness & PPP Flexibility Act
Updates:
May 5, 2021:
The Small Business Administration announced yesterday that Paycheck Protection Program funding has been exhausted and that the PPP application portal stopped receiving applications yesterday for loans.
March 31, 2021:
On March 30, 2021, President Biden signed into law H.R. 1799, a bill extending the Small Business Administration's Paycheck Protection Program. The PPP Extension Act extends the program until May 31, 2021, allowing two more months for loan applications. The extension also gives the SBA 30 additional days to process loan applications made by the new May 31 deadline.
March 15, 2021:
As of March 14, 2021, the PPP Platform has been enabled to accept 2nd draw applications for Borrowers who submitted their first draw in calendar year 2021.
To ensure successful processing, please note that to obtain a 2nd draw, your 1st draw PPP Loan must be considered fully disbursed by SBA processes. The requirements to obtain a 2nd draw PPP loan remain unchanged as part of this process. As a reminder, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. The "Second Draw" program is for small businesses, non-profits, sole proprietors, and independent contractors who have exhausted their initial PPP loan. The program will make new loans through May 31, 2021 (changed to reflect new date in March 31st update), or until the new funding is exhausted. Please note that funding has been exhausted as of May 4, 2021.
Eligibility: You are eligible for a second draw loan if you have exhausted your first PPP loan and
- You have less than 300 employees, and
- You have experienced a greater than 25% reduction in gross receipts during either the first, second, third or fourth quarter in 2020 relative to the same quarter in 2019 or on an annualized basis.
In addition: The SBA is adding two additional organizational types to better support the Schedule C application process. Single Member LLCs, and Qualified Joint-Venture (spouses), can be utilized when utilizing the Schedule C gross income PPP calculation.
On March 4, 2021, the Small Business Administration issued an interim final rule (IFR) implementing the recent changes to the Paycheck Protection Program. The IFR allows individuals who file an IRS Form 1040, Schedule C, to calculate their maximum loan amount using gross income. SBA has issued updated forms for borrowers reflecting these changes and step-by-step loan amount calculations.
Please refer to the tabs below for updated Interim Final Rule and new Application forms.
Interim Final Rule on Paycheck Protection Program as Amended by American Rescue Plan (Released 3/22/2021)
Interim Final Rule on Schedule C Borrowers-Released 3/3/2021
PPP Loan Forgiveness FAQs - Updated October 13, 2020
PPP Interim Final Rule on the Simpler Forgiveness Process for Loans of $50,000 or less. - Updated October 13, 2020
For a listing of all Interim Final Rules related to PPP, click here.
Important Update on PPP Loan Forgiveness
On October 8, 2020, the Small Business Administration (SBA) announced changes to the Paycheck Protection Program (PPP) loan forgiveness process. These changes include a simplified loan forgiveness application for PPP loans of $50,000 or less. This action streamlines the PPP forgiveness process to provide financial and administrative relief to America's smallest businesses while also ensuring sound stewardship of taxpayer dollars.
The SBA and Treasury Department announced a simplified loan forgiveness application for PPP loans of $50,000 or less.
Please note the following documents are required to be submitted to your lender with Form 3508S:
Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the covered period or the alternative payroll covered period, that include a) Payroll tax filings reported, or that will be reported, to the IRS (typically Form 941) and b) State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state
- Payment receipts, canceled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount.
Nonpayroll: Documentation verifying existence of the obligations /services prior to February 15, 2020, and eligible payments from the Covered Period
- Business mortgage interest payments: Copy of lender amortization schedule and receipts or canceled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments
- Business rent or lease payments: Copy of current lease agreement and receipts or canceled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments
- Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, canceled checks, or account statements verifying those eligible payments.
Learn more about this guidance and the applicable forms by clicking
here.
Under the Paycheck Protection Program Flexibility Act of 2020, which went into effect on June 5, 2020, the payment deferral period was extended from six months to 12-16 months. The 12-16 month length of the deferral period will depend on if you are utilizing the original eight-week Covered Period or the extended 24-week Covered Period to exhaust your PPP funds. Borrowers with loans dated after June 5, 2020, will automatically have a 24 week Covered Period. Borrowers with loans dated prior to June 5, 2020, have the choice between an eight-week Covered Period or a 24-week Covered Period. Please note - If a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA.
PPP Loan Forgiveness Forms & Guidelines
- PPP loans have an interest rate of 1%
- Loans issued prior to June have a maturity of two years. Loans issued after June 5 have a maturity date of five years.
- Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred ten months after the end of the covered period for the borrower's loan forgiveness (either eight weeks or 24 weeks).
- No collateral or personal guarantees are required
PPP Flexibility Act / June 5, 2020 Update
The SBA, in consultation with the Department of the Treasury, released an interim final rule to reflect changes made by H.R. 7010, the Paycheck Protection Program Flexibility Act, which was signed into law by President Trump on June 5, 2020. Along with this interim final rule, a revised, borrower-friendly PPP loan forgiveness application was also released.
The key highlights of the PPP Flexibility Act are:
- Extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lower the requirements that 75% of a borrower's loan proceeds must be used for payroll costs and that 75% of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60% for each of these requirements. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements for guidance issued between March 1, 2020, and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID-19.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
- Increase to five years the maturity of PPP Loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020, and provides an option for loans made prior to that date to extend maturity from two years to five years at the mutual agreement of the borrower and lender.
- Clarifies that if a borrower submits its forgiveness application within 10 months of the end of the loan forgiveness period, the borrower will not have to make any payments on the loan before the date SBA remits the forgiven amount to the lender.
- Confirms that June 30, 2020, will remain the last date on which a PPP loan application can be approved.
In addition to revising the full forgiveness application, SBA also published a new EZ version of the forgiveness application that applies to borrowers that:
- Are self-employed, an independent contractor or a sole proprietor with no employees: OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees (excepting laid-off employees who refused an offer to return); OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
The EZ application requires fewer calculations and less documentation for eligible borrowers. Details regarding the applicability of these provisions are available in the instructions to the new EZ application form. SBA also updated the regular Form 2508 to reflect recent changes made by Congress in the PPP Flexibility Act and issued a new interim final rule that implements changes made by the PPPFA.
The SBA, in consultation with the Department of the Treasury, released an interim final rule to reflect changes made by H.R. 7010, the Paycheck Protection Program Flexibility Act, which was signed into law by President Trump on June 5, 2020. Along with this interim final rule, a revised, borrower-friendly PPP loan forgiveness application was also released.
What is the Paycheck Protection Program?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses. These loans may be forgiven if borrowers maintain their payrolls during the crisis and restore their payroll afterward.
- 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
The SBA announced on May 5, 2021, that Paycheck Protection Program funding has been exhausted and that the PPP application portal stopped accepting applications.
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.