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Paycheck Protection Program

SBA PPP Forgiveness Process: June 22, 2020 UPDATE

The Paycheck Protection Program (“PPP”) administered by the Small Business Administration (“SBA”) continues to evolve as policy-makers decide how to administer the program as effectively as possible.  As the forgiveness phase of the program begins, please note some recent developments that may assist you in the forgiveness process going forward.

On May 15, 2020 the SBA published a forgiveness application (“Application”) PPP borrowers must submit to lenders. The Application was lengthy and required a lot of detailed information to be submitted along with the Application.  That Application has since been replaced by further guidance described below.

On June 5, 2020 President Trump signed the PPP Flexibility Act, which amended several aspects of the PPP program.  A few amendments under the new law that may be favorable to PPP borrowers include:

  • Borrowers now have 24 weeks from funding to properly use PPP funds (increased from 8 weeks).
  • Borrowers now may use up to 40% of PPP funds for non-payroll expenses (increased from 25%). There will be a reduction in loan forgiveness if a Borrower uses less than 60% of the loan for payroll costs.
  • The end date to use PPP funds was extended from June 30, 2020 to December 31, 2020.

 

On June 17, 2020, the SBA released a new, streamlined "EZ" forgiveness application and instructions, updates to the "full" forgiveness application and instructions, and an interim final rule that aligns prior SBA guidance with the PPP Flexibility Act. The new "EZ" application reduces the documentation and number of calculations required to apply for forgiveness and generally applies to the following:

  • Borrowers that are self-employed, independent contractors or sole proprietors with no employees.
  • Borrowers that did not reduce wages for any employees by more than 25% and did not reduce the number of employees or average paid hours during the covered period.
  • Borrowers that did not reduce wages for any employees by more than 25% and were unable to operate during the covered period at the same level of business as before February 15, 2020.

 

Please consider the following as you evaluate your forgiveness options going forward:

  • The SBA and US Treasury continue issuing new guidance. Patiently awaiting and thoroughly evaluating updated forgiveness guidelines could avoid duplication of work by you and provide time to assess available options to maximize your loan forgiveness. 
  • Based on the anticipated volume of forgiveness Applications, and depending on final procedures established by SBA and US Treasury, the forgiveness process could take an extended period of time to complete. Under the CARES Act, the Bank has 60 days to process a completed and fully-documented forgiveness Application. Upon submission by the Bank, the SBA then has 90 days to process and/or confirm forgiveness on the loan.

 

Please continue educating yourself about the PPP program and the new PPP Flexibility Act as you consider forgiveness options. You can access current information from the following:

US Treasury: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

SBA: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

First Palmetto Updates: https://www.firstpalmetto.com/business/ppp/ 

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We look forward to working with you on the forgiveness process. Like you, we receive and interpret updated information as it is made publicly-available. Work is underway to incorporate the most recent round of guidance, and we'll continue to adapt as new guidance is released to serve you as efficiently as possible.  Thank you for your patience as we navigate this process together.  We appreciate the opportunity to serve you.

 

Important Disclosure Information: First Palmetto Bank will process your application for loan forgiveness as the originating lender for your PPP loan based on the guidance and parameters established by the SBA or US Treasury, which may be subject to change. The SBA and/or US Treasury, and not First Palmetto Bank, sets criteria for loan forgiveness, including eligibility criteria and the parameters that determine how much of your loan may be forgiven. The SBA or US Treasury may instruct First Palmetto Bank to hold your loan forgiveness application if it decides to conduct a review of your application, or it may instruct the Bank to deny your loan forgiveness application. In its guidance, the SBA has indicated the reasons why it may decide to review an application for loan forgiveness.