SBA Paycheck Protection Program
January 11, 2021 Update
WE ARE NOW ACCEPTING APPLICATIONS FOR PPP LOANS!!
The Economic Aid Act was signed into law and begins implementation this week. To begin on January 11, only certain Community Financial Institutions (CFI’s) will be allowed to accept applications and obtain SBA commitments for First Time PPP Borrowers, and most bank/credit unions are not considered CFI’s. On January 13, the SBA portal will open for CFI’s to begin submitting commitments for Second Draw PPP loan requests but only exclusive to CFI’s. The guidance published over the weekend only explains that bank/credit unions will be notified once available to submit to the SBA for PPP commitments. There are two revised application forms published as of January 8 which cover First Draw and Second Draw requests. The First Draw is reserved for those small businesses that have not previously received PPP funds and the Second Draw is reserved for those seeking a second round of PPP funds. Please review in full along with the included instructions (links attached below) and remember these are subject to changes/revisions. We will continue to accept handwritten initial versions to start but require an eSigned version on or before closing/funding. At this time, even though the SBA Portal for obtaining commitments is not open we are not aware of any provision that prohibits us from beginning to accept applications.
- Second Draw Loan Terms:
- 1.00% rate
- 5-year maturity
- No collateral or personal guarantees
- The business or organization must have been in operation as of February 15, 2020
- The last day to apply for and receive a PPP loan is March 31, 2021
- For Second Draw applicants, the borrower must have used or will use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw loan
- Biggest Qualification – the business must demonstrate gross revenue reduction not less than 25% from the same period in 2019; meaning showing at least one corresponding quarter from 2019 to 2020 with a 25% reduction in gross revenues
- Typically done using 2020 tax forms, quarterly financial statements or bank statements
- The same calculation for maximum loan amount (max of $2,000,000):
- Average total monthly payroll during the prior 1-year period (or 2019) multiplied by 2.5x
- Maximum of 300 employees
- Expanded allowable use of funds to qualify for forgiveness
- Loans of $150,000 and less will not require any additional supporting documentation other than what was previously submitted to Vibrant Credit Union/Northpoint Commercial Credit other than the application and certifications, but documentation must be provided prior to applying for forgiveness
We are still anticipating additional guidance and changes throughout the week as the SBA implements this next round of funding and works through the process and a new system. Continue to reach out to us via firstname.lastname@example.org with any questions.
Forgiveness – General Updates:
First Payment Due Date – see the attached notice regarding the first payment due date for each PPP borrower –> Notice-Due Date Extension
We started processing forgiveness applications via DocuSign on August 10, 2020. To-date we have submitted numerous applications for forgiveness and will continue to do so as quickly as possible. As previously communicated, we started reaching out to borrowers that had already accessed our secure upload portal, uploaded documents and confirmed funds were used. Once we moved through these loans we began reaching out to all other borrowers that had not requested access but had confirmed full usage of the PPP funds. If you would like to move forward with the forgiveness process, please email email@example.com to request access to the secure portal and for the forgiveness application. Be sure to provide the correct type of forgiveness application form (see below); either the EZ form or Regular form. The Treasury/SBA published updated FAQ’s (see below) as of October 7, 2020.
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
The SBA published three revised forgiveness applications (see below): a limited version for those $50,000 and less, an EZ-Application and Regular Application. The EZ-Application instructions provides a checklist to determine if your business is eligible to use this version, otherwise will require use of the Regular Application. Additionally below is a link to the FAQ’s on PPP Loan Forgiveness published October 7, 2020:
These versions both include instructions to begin reviewing to determine which version is appropriate for your business. As done during the original application processing for SBA PPP loans we will require the use of our online DocuSign forgiveness application, but if you have already completed a handwritten/typed-in version feel free to send us a copy as it will help us to pre-fill as much of the information as we can into the electronic version we will send and requires an electronic signature.
We do have the ability for each borrower to access the loan details and upload documents securely. If you would like to obtain access, please contact firstname.lastname@example.org and we can assist with setting up access online. This is a secure method to share documents. If you request access to our portal and begin uploading documents, at that time we will assign a processor to begin reviewing. We have already received numerous requests for access to our secure portal along with document uploads, full use of the funds and supporting documentation. These requests will be given initial priority as we have them in a queue for eSign forgiveness applications, underwriting review and submission to the SBA.
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.
For the most up to date guidance and FAQ’s please visit the U.S. Treasury website at:
When will my first payment due date be given the delays by the SBA in processing?
- See above regarding the Notice of Due Date Extension along with Treasury/SBA FAQs published October 7, 2020 (Question #52).
The PPP loan forgiveness application forms display an expiration date of 10/31/2020 in the upper-right corner. Is October 31, 2020 the deadline for borrowers to apply for forgiveness?
- No. Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination. However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before loan repayment begins.
- The expiration date in the upper-right corner of the posted PPP loan forgiveness application forms is displayed for purposes of SBA’s compliance with the Paperwork Reduction Act, and reflects the temporary expiration date for approved use of the forms. This date will be extended, and when approved, the same forms with the new expiration date will be posted.
How should I prepare for the PPP Forgiveness Process?
- Review and determine which Forgiveness Application form is most appropriate based on the instructions (3 Versions Available).
- Request access to our secure upload portal via email@example.com.
- Begin uploading supporting documentation that matches your use of funds in accordance with PPP guidelines, rules and FAQ’s.
- Communicate with your assigned processor once you have uploaded documents which application form is most appropriate.
- Maintain supporting documentation and any additional documentation that may be beneficial as questions may arise from underwriting.
What documentation will I be required to submit along with the PPP Forgiveness Application?
- Please review the PPP Forgiveness Application Form Instructions which outlines both the required supporting documentation
- Please pay special attention to the section labeled “Documents that Each Borrower Must Maintain but is Not Required to Submit” – by accepting the terms of the SBA PPP loans, each Borrower is subject to potential review/audit by the SBA, so you will be required to maintain all supporting documentation for a period of six years after the date the loan is forgiven or repaid in full.
What can I use allocated loan dollars for?
- January 11, 2021 – please review the SBA guidance as these categories expanded for Second Draw eligible uses
- 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 40% 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.
- The 8-week “covered period” was recently changed to 24-weeks
Loan Forgiveness Process?
- Borrower submits completed Loan Forgiveness Application (SBA Form 3508S, 3508EZ or 3508) along with required supporting documentation to Lender
- Documentation requirements:
- SBA Form 3508S, 3508EZ or 3508
- Required supporting documentation as outlined in SBA Form 3508S/3508EZ/3508 to support payroll and non-payroll eligible expenses (see Instructions for required support documentation to provide)
- Additional information that is optional in SBA Form 3508S/3508EZ/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 for final decision
- 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. The 90 days for the SBA can be extended if the forgiveness request has been selected for an audit/review by the SBA or Treasury
- 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 10 months following the date of disbursement of the loan
- However, interest will continue to accrue on PPP loans during the eligible deferment period
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 5 years with a published rate of 1.00%.
- Note: this was changed from 2 years to 5 years recently for those commitments secured on/after June 5, 2020. Any commitments prior to June 5, will be at the discretion of the lender; focused only on those with continued business hardship.
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.
*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.