SBA Paycheck Protection Program
June 4, 2020 Update
Late afternoon on June 3, the U.S. Senate approved Bill H.R. 7010 (H.R. 7010) which approved a few changes to the original CARES Act Bill:
- extended the 8-week “covered period” to 24 weeks; allowing more time to use the funds available
- Note: the earlier of 24 weeks after initial disbursement of funds, or December 31, 2020
- extended the maximum “covered period” to extend out from June 30, 2020 until December 31, 2020
- extended the deadline to allow for re-hiring certain eligible employees back to full employment by December 31, 2020 to qualify for loan forgiveness
- increased the allowable use of proceeds to 40% for non-payroll eligible expenses
- extension of deferral for first payment
- allows for flexibility on maturity date extensions for loans with a remaining balance after the application of forgiveness
While these changes did move to the President’s desk for signature, we anticipate it will still take several days for the SBA/U.S. Treasury to publish any form or guidance changes to reflect these updates. We do anticipate the forgiveness application published on May 15, 2020, will change along with the guidance and interim final rules that were shared along with the forgiveness application. Once received, we will publish on our website along with sending out to all borrower main contacts we have on file via email distribution.
While many borrowers may have specific questions on forgiveness, we are still awaiting further guidance and clarifications. Additionally, we are awaiting guidance and procedures on how to submit any requests for forgiveness to the SBA. With these delays by the SBA, we do anticipate the 6-month deferral on payments being extended.
We do have the ability for each borrower to access the loan details and upload documents. If you would like to obtain access, please contact email@example.com and we can assist with setting up access online. This is a secure method to share documents.
Please also be aware the CARES Act outlined a time period of up to 60 days for the SBA to approve requests for forgiveness. If approved, the SBA has up to 90 days to issue repayment of any forgiveness amounts.
Northpoint Commercial Credit, LLC, has partnered with Vibrant Credit Union based in Moline, Illinois, to be one of the leading providers for the SBA Paycheck Protection Program. Vibrant Credit Union is federally insured by the NCUA and is able to provide commercial deposit and treasury management services to help your business function more efficiently.
|7(a) LOAN PROGRAM||STANDARD||PAYCHECK PROTECTION PROGRAM|
|DEFERMENT OF PAYMENTS||N/A||Minimum of 6 months|
|USES||Acquire land; purchase existing building; convert, expand or renovate buildings; acquire and install fixed assets; acquire inventory; purchase supplies and raw materials; purchase a business, start a new business; leasehold improvements; term working capital, or refinance certain outstanding debts||Payroll support, including paid sick, medical or family leave, and costs related to the continuation of group health care benefits during those periods of leave; employee salaries, interest portion of mortgage obligations, rent, utilities, and any other debt obligations incurred before the covered period.|
|SBA GUARANTEE||85% for loans up to $150,000 and 75% for loans greater than $150,000||100%|
|COLLATERAL||Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount.||No collateral required|
|FORGIVENESS OF LOAN||N/A||The following costs may be eligible for forgiveness: (1) payroll costs, (2) any payment of interest on a covered mortgage obligation (which will not include any prepayment of or payment of principal on a covered mortgage obligation), (3) any payment on any covered rent obligation, (4) any covered utility payment.|
For the most up to date guidance and FAQ’s please visit the U.S. Treasury website at:
What can I use allocated loan dollars for (see Interim Final Rule above 5.22.2020 for further definitions of the items below – page 6-7)?
- Payroll costs
- Payments for the continuation of group health care benefits, which includes paid sick, medical and family leave and insurance premiums
- Employee salaries, commissions or similar compensations
- Interest payments on any business mortgage obligation on real or personal property that was incurred before February 15, 2020 (but not any prepayment or payment of principal)
- Payments on business rent obligations on real or personal property under a lease agreement in force before February 15, 2020
- Business utility payments for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020
- Eligible “Non-payroll costs” listed above cannot exceed 25% of the loan forgiveness amount
- Note: the forgiveness interim final rule outlines two options for the eligible 8-week “covered period” for payroll costs; the start date from the date of loan disbursement, or the “alternative payroll covered period”. Be sure to review these sections depending on how your payroll is paid. Additionally, for owner-employees please read the Interim Final Rule Question #3 to limits imposed.
Are there reductions to Loan Forgiveness Amounts?
- Review Interim Final Rule (above 5.22.20) – pages 13-22
- Changes in FTE’s (calculated using 40 hours per week)
- Reduction in salary/wages
Loan Forgiveness Process?
- Borrower submits completed Loan Forgiveness Application (SBA Form 3508) along with required supporting documentation to Lender
- Documentation requirements:
- SBA Form 3508
- Required supporting documentation as outlined in SBA Form 3508 to support payroll and non-payroll eligible expenses
- Additional information that is optional in SBA Form 3508 or requested by Lender
- Documentation requirements:
- Lender will review the Application and Supporting documentation and may request additional information
- Lender has 60 days from receipt of a completed application to issue a decision to the SBA
- If approved, the Lender will request payment from the SBA at the time of decision
- The SBA has 90 days to remit payment of forgiveness amount, plus any accrued interest through the date of payment, to the Lender
- Any remaining balance not forgiven must be repaid on or before the maturity date of the Note
What if my forgiveness request is denied or partially approved?
- Lenders will provide appropriate notification for any denials or partial approval of forgiveness requests
- The SBA provides 30 days to dispute these decisions
Would I be eligible for loan deferment on payments?
- Lenders are required to provide complete payment deferment relief of covered loans for a period of no less than 6 months to no more than 1 year, following the date of disbursement of the loan
- However, interest will continue to accrue on PPP loans during this six-month deferment
Are there any other conditions?
- During the “covered period” the SBA is waiving typical SBA fees
- During the “covered period” the requirement that a small business concern is unable to obtain credit elsewhere shall not apply to a “covered loan”, which is removing the typical requirement the SBA be the lender of last resort.
- During the “covered period” for a “covered loan”, no personal guarantee shall be required and no collateral shall be required
- There will be no prepayment penalty for any payment made on a “covered loan”.
- For any remaining balance after application of forgiveness, the term shall be a period of 2 years with a published rate of 1.00%.
How long should the borrower retain documentation for PPP loans?
- the Borrower must retain PPP documentation in its files for six years after the date the loan is forgiven or repaid in full, and must permit the SBA or designated oversight office to access such files upon request.
Can I apply for more than one PPP loan?
*You should consult your own tax, legal and accounting advisors before engaging in any transaction.
**This is only an estimate and is not an agreement or confirmation by Northpoint Commercial Credit, LLC.