Paycheck Protection Program (PPP)

Details

One of the most notable features of PPP loans is that all, or some, of the loan amount will be forgiven if:

• The funds are used within 24 weeks of the day you receive the funds. Borrowers that received their PPP loan prior to enactment of the Paycheck Protection Program Flexibility Act still have the option to use the previous eight-week covered period.
• The funds are used for approved purposes including:
  • Payroll costs, including salaries, wages, tips, commission, etc. up to $100,000 annualized per employee whose principal residence is in the U.S.
  • Employer-paid state and local payroll taxes (not federal employment taxes)
  • Employer-paid vacation, parental, family, medical, or sick leave except for payments for which a credit is allowed under the Families First Coronavirus Response Act (FFCRA)
  • Severance
  • Employer-paid group health insurance premiums
  • Employer-paid retirement benefits
  • Rent and lease agreements that originated before Feb. 15, 2020
  • Mortgage interest (not principal payments or prepayments) that were in force before Feb. 15, 2020
  • Utilities, including electricity, gas, water, transportation, telephone, and internet for services that began before Feb. 15, 2020
• No more than 40% of the loan forgiveness request is for non-payroll costs. (To be eligible for full loan forgiveness, borrowers must use no more than 40% of the total loan amount for non-payroll costs).
• You restore your FTE employment level by Dec. 31, 2020 (or by June 30, if using the initial eight-week covered period). An exemption is available for borrowers that could not return to full business activity due to compliance with government safety regulations, as well as for eligible businesses with PPP loans of $50,000 or less (see below).
• You restore salaries or hourly wages for each employee making up to $100,000 (annualized) by Dec. 31, 2020 (or by June 30, if using the initial eight-week covered period). Eligible businesses with PPP loans of $50,000 or less are exempt from this requirement (see below).

Please note: If applicable, SBA will deduct any EIDL advance amount you have received from the forgiveness amount remitted to the Lender, as required by section 1110(e)(6) of the CARES Act. For details from the SBA, visit PPP or EIDL.

Important update: Through a rule change enacted in October, eligible borrowers with PPP loans of $50,000 or less can take advantage of a simplified forgiveness application, which exempts them from reductions in loan forgiveness due to:

• Reductions in full-time-equivalent (FTE) employees
• Reductions in employee salary or wages

This exemption is not available to borrowers who, together with their affiliates, received loans totaling $2 million or more. See the SBA’s simplified application instructions for additional details.

Application

Our PPP loan team will contact your business when our online PPP Loan Forgiveness portal is ready for your application. You will need your SBA Loan Number and TIN/SSN to begin the process. You will be required to upload various documents that will be used to verify your payroll, rent, utilities, and interest information and amounts. Note that this online application is only available to businesses that received a PPP loan through Bank of the Sierra.

Depending on your eligibility, our online portal will let you complete one of the following PPP forgiveness applications:

• Simplified Forgiveness Application for PPP loans of $50,000 or less
• EZ Application for self-employed individuals, independent contractors, and sole proprietors who had no employees at the time of the PPP loan application, or for businesses that did not reduce employee wages/hours (learn how to apply using the EZ version)
• Regular Application for all other PPP borrowers (learn how to apply using the regular version)

If you are ready to apply for PPP loan forgiveness, a list of required documents is available by visiting the SBA's Paycheck Protection Program webpage.

On June 5, 2020, the Paycheck Protection Program Flexibility Act was signed into law. This legislation amends many aspects of the PPP to provide more flexibility for borrowers and to make it easier to qualify for loan forgiveness. Here are some of the key updates to the program:

• The loan term was changed from two years to five for PPP loans made on or after June 5, 2020. Borrowers who received their loan before this date have the option to extend their loan from two to five years with the lender’s approval.
• Loan deferment has been extended from 6 months to the date that your amount of loan forgiveness is determined or 10 months after the last day of the covered period if you do not apply for loan forgiveness within that time. (Note: interest will accrue during the deferment period.)
• The covered period during which PPP funds used for eligible expenses can qualify for forgiveness has been expanded from eight weeks to 24 weeks. However, borrowers that received their PPP loan prior to enactment of the Paycheck Protection Program Flexibility Act still have the option to use the previous eight-week covered period.
• The 75% payroll requirement has been lowered to 60%.
• Businesses now have until December 31, 2020, to return to full employment in order to qualify for loan forgiveness. However, borrowers who received their PPP loan prior to the Paycheck Protection Program Flexibility Act have the option to continue to use the initial June 30 deadline to meet this requirement.
• Under the CARES Act, a business with a PPP loan could defer payments of the employer’s share of 2020 Social Security taxes until they are granted forgiveness of their PPP loan. This has been amended to allow businesses that receive PPP loan forgiveness to continue delaying payment of these taxes. Please speak with your tax advisor for additional guidance.

As part of the federal stimulus measures to address the COVID-19 pandemic, the Coronavirus Aid, Relief, and Security Act (CARES Act) was signed into law on March 27, 2020. A key piece of this legislation is the Paycheck Protection Program (PPP). This program authorizes government funding for low-interest, forgivable loans for small businesses and nonprofits to encourage them to retain or rehire their employees.

Through the Paycheck Protection Program Flexibility Act, the PPP has been amended to provide more flexibility for businesses and to make it easier to qualify for loan forgiveness. Additionally, while the program was slated to end on June 30, Congress extended the application period by five weeks to give businesses more time to apply.

In keeping with the program guidelines, Bank of the Sierra is no longer accepting applications for PPP loans. However, businesses that already applied for a PPP loan from Bank of the Sierra can check their application status online.

PPP loans are offered by the Small Business Administration (SBA) through SBA-approved lenders, like Bank of the Sierra. Features include:

• Available to all businesses, nonprofits, veterans organizations, tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors with 500 employees or fewer as well as certain types of larger multi-site businesses that meet certain criteria.
• No collateral and no personal guarantee are required.
• Loans are up to 2.5x a business's average monthly payroll costs from 2019, up to a maximum of $10 million.
• There are no fees.
• The term is for 5 years with a 1% fixed interest rate. (Note: PPP loans issued before June 5 have a 2-year term; borrowers with a 2-year term may contact their business banker to see if they are eligible to switch to the 5-year term.)
• Loan payments are deferred until your amount of loan forgiveness is determined or until 10 months from the date that your covered period ends, if you do not apply for loan forgiveness (interest will accrue during this time).
• There is no prepayment penalty.

Small businesses that receive funds through the program can use them to pay for the items listed below:

• Payroll costs, including salaries, wages, tips, commission, etc. up to $100,000 annualized per employee whose principal residence is in the U.S.
• Employer-paid state and local payroll taxes (not federal employment taxes)
• Employer-paid vacation, parental, family, medical, or sick leave except for payments for which a credit is allowed under the Families First Coronavirus Response Act (FFCRA)
• Severance
• Employer-paid group health insurance premiums
• Employer-paid retirement benefits
• Rent and lease agreements that originated before Feb. 15, 2020
• Mortgage interest (not principal payments or prepayments) that were in force before Feb. 15, 2020
• Utilities, including electricity, gas, water, transportation, telephone, and internet for services that began before Feb. 15, 2020
• Refinancing an SBA EIDL loan made between Jan. 31, 2020, and April 3, 2020

Small businesses were able to receive 2.5x the average of their monthly payroll costs from January 1, 2019 through December 31, 2019. If their business was seasonal, borrowers had the option to choose the time period of February 15, 2019, to June 30, 2019, instead. And, if their business was new, borrowers were able to choose the time period of January 1, 2020, to February 15, 2020. Loan amount calculations were based on the following items:

• Salaries, wages, commissions, and tips up to $100,000 per employee on an annual basis
• Employer-paid vacation pay and parental, family, medical, and sick leave not credited through FFCRA
• Severance
• Employer payments for group medical insurance benefits (i.e., premiums)
• Employer payments for retirement benefits
• Employer-paid state and local payroll taxes

Applicants were required to exclude the compensation of any employees whose principle residence was outside of the U.S.

You can learn more about the PPP by visiting SBA’s Paycheck Protection Program webpage.