The U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP) is a loan designed to provide direct relief for small businesses to use for payroll, benefits, mortgage interest, rent, and utilities.
ICCU Is Helping Small Businesses
For small businesses struggling during the COVID-19 pandemic, it’s our priority to help you keep the lights on. As a Preferred SBA Lender and one of the state’s largest SBA providers, Idaho Central Credit Union is committed to making this process go smoothly to help businesses and employees during this time.
PPP First & Second Draw Loans
On December 27, 2020 a new round of PPP funding was approved. The program has been allocated an additional $284 billion. Borrowers have until March 31, 2021 to apply for a PPP loan, or until the funds are exhausted.
Below is a summary of the key components of the new PPP program, including some material changes from the initial program and guidelines for second-time borrowers.
Deductibility of Expenses
Borrowers that received PPP loans under the original program or receive loans under the renewed program may take tax deductions for expenses paid for with PPP loan proceeds (consult your tax professional for further guidance).
For first time borrowers, these loans now are called First Draw PPP loans. If your small business did not receive a loan in the first round, and you meet the eligibility requirements, then you may qualify for a PPP loan.
First-time PPP borrowers will be subject to the PPP eligibility rules established under the CARES Act. Publicly traded companies, businesses that were not in operation on February 15, 2020, and entities that receive shuttered venue operator grants are not eligible to receive PPP loans under rules provided for in the Act. Further, your business has no more than 500 employees.
Second Draw Loans
Existing PPP borrowers may apply for a second loan, but they must meet stricter eligibility criteria, and their loan proceeds will be subject to a $2 million cap. The restrictions on second-time PPP borrowers are as follows:
- Second-time PPP borrowers must (1) have no more than 300 employees and (2) have experienced a reduction of at least 25% in gross receipts during a quarter of 2020 as compared with the same quarter in 2019.
- Businesses engaged in political or lobbying activities are ineligible for a second draw.
- The maximum loan amount available to a second-time borrower is $2 million (down from the $10 million cap on loans during the initial program). Each borrower is eligible to receive an amount up to 2½ times its average total monthly payroll during (1) the one-year period prior to the date the loan is made or (2) 2019.
- An eligible business in the accommodations and food services sector can receive up to 3½ times its average total monthly payroll. Your NAICS code must begin with a “72”. If you have questions about this, you can visit www.naics.com/search to determine your exact code.
Expansion of Eligible Expenses
The Act expands the list of expenses eligible for forgiveness to include payments for business software or cloud computing services that facilitate business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses. Borrowers may also use PPP funds to pay for (1) costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance or other compensation; (2) expenditures made to suppliers for certain goods in connection with a borrower’s business; and (3) costs incurred in connection with compliance with COVID-19 related health and safety guidelines, including sanitation standards, social distancing requirements, and other worker or customer safety measures related to COVID-19.
Borrowers can choose the length of the covered period over which they must use the proceeds of their PPP loan. The covered period can be as short as eight weeks or as long as 24 weeks.
The Small Business Administration (SBA) affiliation rules applicable to loans under the original program will continue to apply to first- and second-draw PPP loans.
Repeal of EIDL Deduction
The Act repeals a requirement under the original program that required borrowers to deduct the proceeds of their Economic Injury Disaster Loan advance from their loan forgiveness amount.
If you are one of the 150 business members that had a portion of their loan forgiveness reduced because of the EIDL Advance reduction, the SBA is working on a plan to send Idaho Central those funds. We will communicate with you individually as that plan takes shape.
Increase in PPP Loan Amounts
Borrowers during the first round of PPP funding who would have been eligible to receive an increased loan amount under the new rules established under the Act will be eligible to reapply for the difference.
If your business qualifies for an increase to your first round PPP loan, please fill out a Business Information Request Form and select Paycheck Protection Program. In the comments section, please notate that you would like to request an increase. At this time this is a manual process with the SBA. An ICCU representative will reach out to work with you on that request.
Simplified Forgiveness Process
Borrowers who receive loans of $150,000 or less will be able to apply for loan forgiveness using a simplified one-page loan application, which will require the borrower to provide, (1) the number of employees the borrower was able to retain because of the covered loan, (2) the estimated amount of the loan proceeds spent on payroll, and (3) the total loan amount. Borrowers must also certify that they complied with all program requirements and retain applicable records proving compliance.
The new form for this Simplified Forgiveness Process has not been released by the SBA. Once this form is created and presented to lenders the Credit Union will get this uploaded to our system as quickly as we can.
Complete Program Rules
PPP Loan Forgiveness
Loan Forgiveness Application Portal
Idaho Central has developed an online portal to process PPP Loan Forgiveness. We are opening these up in waves based upon the date your PPP loan was funded. You will be notified via email when it is your turn to start the process.
The PPP rules and the PPP Forgiveness rules have changed frequently. We will do our best to keep you informed.
Due Dates: The SBA changed due dates and due date language during the original PPP loan process. You will now have up to 10 months past your Covered Period before your first payment is due. We are making the changes within our system on a daily basis. There is nothing that you will need to do to extend your first payment due date.
Select Appropriate Application
If you currently have a PPP Loan, the Small Business Administration (SBA) has issued additional guidance, as well as PPP Loan Forgiveness Applications on SBA.gov. Please review the applications and see which one your business qualifies to use. Each application gives borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process.
Simple Application (SBA Form 3508S). This simple form does not require any calculations on the application. You are eligible if your PPP loan was $50,000 or less. There are still items that need submitted to the SBA, but it is less than even the EZ form.
Preview the application at home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Form-3508S.pdf
You are not obligated to use this application. If you would like to use one of the other forgiveness applications you are able to do so.
EZ Application (SBA Form 3508EZ). The EZ Application requires fewer calculations and less documentation for eligible borrowers. You might be eligible if you meet at least one of the following:
- Are self-employed, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application; OR
- Did not reduce the salaries or wages of your employees by more than 25%, AND did not reduce the number or hours of your employees; OR
- Did not reduce the salaries or wages of your employees by more than 25%, AND experienced reductions in business activity as a result of health directives related to COVID-19.
Standard Application (SBA Form 3508). If you are unable to meet any of the criteria listed under the EZ Application, you must use the regular loan forgiveness application.
For more information, download the instructions for the Paycheck Protection Program Loan Forgiveness Application.
Gather Required Documentation
Once you determine the appropriate application, please begin gathering the required documentation. Please do not submit a Loan Forgiveness Application at this time.
ICCU will have 60 days from receipt of a completed application to submit it to the SBA. The SBA then has an additional 90 days to process the application. The Paycheck Protection Program Flexibility Act also extends the potential maturity of the loan, as well as your first payment date. ICCU will work diligently to submit more than 3,700 applications for the business members we have been able to help.
Payroll Costs. Now ONLY 60% of your qualified expenses need to be spent on payroll related items. You can start gathering your payroll reports, tax forms, payment receipts and so forth that will be required for submission. The necessary documentation requirements are outlined in both applications.
Non-payroll Costs. Up to 40% of your qualified expenses can now be used towards non-payroll expenses. As a lender, we need to verify business mortgage interest payments, lease agreements or utility payments if they are going to be included. The necessary documentation requirements are outlined in both applications.