The SBA Paycheck Protection Loan Program
UPDATE as of 4/24/20: President Trump has signed another relief bill into law, providing additional funds for the Paycheck Protection Program. We anticipate the application portal to reopen on April 27, 2020. Contact your United Bank lender to begin your application as soon as possible.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. As part of this nearly $2.2 trillion aid package to fight the COVID-19 (Coronavirus) pandemic, Congress appropriated approximately $349 billion for the creation of the Paycheck Protection Program (PPP). This program provides payroll assistance for the nation’s nearly 30 million small businesses, and select nonprofits, in the form of 100% guaranteed loans from the U.S. Small Business Administration (SBA).
Simply put, eligible borrowers work with lenders to apply for and receive loans up to 2.5 times their average monthly payroll expenses for the prior year. Loans, which can be issued between April 3, 2020 and June 30, 2020, will carry a 1% interest rate with a two-year term. Loan payments are deferred for the first six months of the loan.
Additionally, PPP loans contain a forgiveness process, allowing up to eight weeks of covered expenses, including both principal and interest, to be forgiven for the borrower with no tax consequence (forgiveness of indebtedness income is waived). Any remaining balance after the loan forgiveness period maintains a 100% government guarantee while the borrower makes payments. A lender will be able to sell these loans into the secondary market once the funds have been disbursed.
Below is a summary of the PPP and its impact on borrowers.
Borrowers are broadly eligible if they have 500 or fewer employees, or are certain businesses that meet SBA size standards. Additionally, 501(c)(3) nonprofits, 501(c)(19) veterans organizations, and certain tribal concerns qualify for PPP loans. Borrowers may also be sole proprietors, independent contractors, or self-employed. Borrowers must have been in operation on February 15, 2020, and employed either salaried employees subject to payroll taxes or paid independent contractors.
Further, borrowers must certify they meet the criteria above, were impacted by current economic uncertainty, and they will use the funds for allowable uses defined in ‘Loan Terms’ below. Borrowers must also provide the relevant documentation as part of this certification. Finally, borrowers must certify the information they provide is accurate.
These first-come, first-serve loans are offered until June 30, 2020, or until the program runs out of funds. Loans are capped at the lesser of 250% of a borrower’s average monthly payroll costs, or $10 million. Payroll costs include, but are not limited to, salary, paid leave, medical, and healthcare. Further, salary for employees making more than $100,000 is capped at that level for the calculation of loan size. All loans have a 1% interest rate and a two-year term. Loans are 100% guaranteed by the SBA, and electronic signatures or electronic consents may be used. Loan payments may be deferred for up to 6 months.
PPP loans may be used to pay for payroll costs, mortgage interest obligations, rent obligations, utilities, and any other interest payment on debt obligations accrued before February 15, 2020. SBA requires 75% of the loan to be used for payroll costs, while the remaining 25% can be used for the other expenses. Funds used for purposes other than those outlined above must be repaid by the borrower.
SBA will not collect any fees from either the borrower or the lender.
After disbursement of the loan, a borrower is eligible for loan forgiveness on up to eight weeks of covered expenses. A borrower will apply to a lender by submitting all the relevant paperwork, at which time a lender will have up to sixty days to approve or deny the application. Importantly, lenders can rely on borrower documentation for loan forgiveness. If the loan forgiveness application is approved, that portion of a borrower’s loan is forgiven, and SBA will pay the lender the part of the principal amount plus interest.
United Bank’s Involvement in the PPPUnited Bank is an approved SBA lender and is now accepting loan applications for the program. Due to the extremely high demand for this program we are currently restricting applications to customers who had active loan or deposit accounts with the Bank on April 2, 2020.
Customers may inquire directly with a lender to begin the process, or contact us by sending an email with the following information to firstname.lastname@example.org:
- Your name and your business name
- Industry or type of business
- City where your business is located
- How should we contact you? Email or phone (please provide number and best time to call)
One of our lenders will contact you to discuss the CARES program further. The PPP Application will be forwarded to you at that time with instructions for uploading all documents securely, so that the exchange of your private personal information will be encrypted and secured.
For supplemental information, visit the U.S. Department of Treasury to read more.