1So you got your Paycheck Protection Program (PPP) loan and have used all the money on approved forgivable expenses!
Now we began our focused attention on the forgiveness phase.
UPDATE 10/21/2020: We will be mailing notification letters to all PPP Loan Customers very soon. The purpose of the letter will be to provide a deferment of the first payment date for PPP loan. The notification letter is being sent as mandated by SBA in regard to the PPP loans payments scheduled. If you have any questions or concerns feel free to reach out to your loan officer that assisted you with the PPP application and loan.
Law background (not all-inclusive):
- The CARES Act was signed into Law on March 27, 2020. Section 1102 of the Act temporarily permitted the Small Business Administration (“SBA”) to implement the Paycheck Protection Program (“PPP”).
- The Paycheck Protection Program Flexibility Act of 2020 was signed into Law on June 5, 2020
Law impact to Anderson Brothers Bank (“ABB”) PPP Loan Customers:
- The implementation of the Laws, as mentioned above, along with many compliance rules issued by the SBA, may have created “forgiveness” anxiety and confusion for PPP borrowers nationwide.
- The terms and conditions governing the PPP Loans are issued and controlled by the SBA.
- The PPP Borrower is solely responsible for compliance with SBA guidance and requirements.
- The Treasury link below will provide the information needed for you or your advisor to explain and prepare your forgiveness application.
- The biggest concern for ABB`s PPP borrowers is forgiveness. You have your PPP loan, but what is the next step? We will explain below.
- To best understand the forgiveness steps and compliance rules visit the Treasury website link below:
- There have been so many changes by SBA and Law enactments it is best for ABB to provide you reference links for you and/or your professional advisor to review as you assess the requirements and timeline for forgiveness.
- The biggest source of confusion is the “covered” period regarding payroll costs. Below is an excerpt which best explains the covered period definition. The excerpt below is from the Treasury website “Frequently Asked Questions on PPP Loan Forgiveness” dated August 11, 2020 (see the referenced link above):
PPP Forgiveness FAQ notations:1 The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or
(2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day)
Covered Period. For example, if the borrower is using a 24-week Covered Period and received its PPP loan
proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period
is Sunday, October 4. In no event may the Covered Period extend beyond December 31, 2020.2 Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using
the 24-week (168-day) period (or for loans received before June 5, 2020 at the election of the borrower,the eight-week (56-day) period) that begins on the first day of their first pay period following their PPP loan disbursement
date (i.e., the “Alternative Covered Period”). For example, if the borrower is using a 24-week Alternative Payroll
Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period
following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is
April 26 and the last day of the Alternative Payroll Covered Period is Saturday, October 10. In no event may the
Alternative Payroll Covered Period extend beyond December 31, 2020.
As long as a Borrower submits its loan forgiveness application within ten months of the completion of the Covered Period (as defined above), the Borrower is not required to make any payments until the forgiveness amount is remitted to ABB by SBA. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. ABB is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or, SBA determines no amount of the loan is eligible for forgiveness) and the date on which the Borrower’s first payment is due, as applicable.
If the loan is fully forgiven, the Borrower is not responsible for any payments.
If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the Borrower on or before the maturity date of the loan.
The Borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven.
PPP Loan Customers Procedures with ABB:
- There is a lengthy timeline for ABB and SBA to act on these forgiveness applications. This is why we suggest, but cannot require, PPP Borrowers with Loans of less than $150,000 to wait on Congressional action for automatic forgiveness. Congress has several Bills, which are NOT yet Law. One of these Bills will provide automatic forgiveness for PPP loans under $150,000. You, as PPP Borrower, must adhere to the mandatory filing deadline as prescribed by SBA. We will keep you informed as this process with Congress develops.
- Your ABB Loan Officer will be reaching out to you soon if your loan is $150,000 or greater.
- You may contact your Loan Officer immediately if you choose.
- We can provide you some information which may assist you in the forgiveness process.
- For PPP Borrowers whose loans are less than $150,000, feel free to provide your Loan Officer with a completed forgiveness application, which is form 3508 or 3508EZ, if you have met your required disbursements for PPP Loan forgiveness.
Modification of PPP Loan:
- Many of ABB`s PPP Loan customers will have a first payment of principal and interest beginning very soon. Because of changes in the Law and SBA guidelines, it is likely you, the PPP Borrower, may want to delay the start of the monthly installment payments which is allowed within SBA guidelines.
- Please reach out to your ABB Loan Officer who assisted you with your initial PPP loan. We are prepared to modify your payment structure, as applicable, based on SBA guidelines and Law changes.
It has been our sincere pleasure to serve you in the PPP process. Your business is valuable to you and our community. We pledge ABB`s full support to you. Thank you!
Quick Links to full details and applications;
3508s Loan Forgiveness for loans less than $50,000
3508EZ Loan Forgiveness