CARES Act Paycheck Protection Program
Due to high interest in the PPP loan program, we are currently experiencing elevated call and email volumes. From additional funding, new options for second-draw loans, a simplified forgiveness process and changes to EIDL advance deductions, a lot of changes were made to the PPP program. To help, we created an overview that will answer many of your questions specifically focused on the new legislation. You can also learn more about PPP loan forgiveness here.
Overview of Changes to PPP Due to Recent Legislation
Once the application period opens, PPP loans are available to the following:
- First-time qualified borrowers, including
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
- Sole proprietorships, independent contractors, and eligible self-employed individuals.
- Nonprofits (including places of worship).
- Businesses that previously received a loan as a new “second-draw” option, including businesses
- With 300 or fewer employees.
- That have used or will use the full amount of their first PPP loan in accordance with program requirements.
- Able to show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
PPP loan funds must be spent on at least 60% of a borrower’s payroll expenses, with the remaining 40% eligible for expenses like rent, covered mortgage interest, and utilities. The following expenses may also potentially be forgivable in the current 2021 program:
- Operating costs, like software,cloud computing, human resources, or accounting needs.
- Property damage costs due to public disturbances occurring in 2020 and that aren’t covered by the borrower’s insurance.
- Supplier costs: any purchase order or order of goods made prior to receiving a PPP loan that’s essential to a borrower’s operations.
- Worker protection expenditures: any personal protection equipment (PPE; e.g., masks, latex gloves) or property improvements made from March 1, 2020 onward that allowed the borrower’s operation to be considered compliant with regards to health officials’ orders due to the COVID-19 pandemic.
Most PPP loan borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs. Borrowers considered a hotel or restaurant may receive up to 3.5 times their average monthly payroll costs on second draw loans.
Regardless of the type of borrower, the maximum amount of a second draw PPP loan is $2 million, first loans are still available up to the $10 million maximum from 2020.
As part of the latest round of 2021 PPP funding, a simplified forgiveness application process for loans of $150,000 or less will be available. Specifically, those who borrow $150,000 or less shall receive forgiveness if they sign and submit, to the lender, a certification no more than one page in length that includes:
- A description of the number of employees the borrower was able to retain because of the loan.
- The estimated total amount of the loan spent on payroll costs.
- The total amount of the loan.
Additional guidance and a new Forgiveness application is expected for these loans.
Eligibility for full PPP loan forgiveness is contingent on whether borrowers will have spent no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks.
- Changes for Schedule C filers for calculating their loan amounts. This will allow Schedule C filers to elect to use their GROSS income (instead of net income) from IRS form 1040 Schedule C. Because of this change, eligible applicants may qualify for a larger loan amount, particularly those that earned less than $100k in net income (line 31 of IRS Form 1040 Schedule C). This rule change is not retroactive and will only apply to eligible applicants that apply following the rule change. Some borrowers may be eligible to cancel a previous loan request and elect to apply under the new rules. Once a PPP loan has been funded, it is unlikely to be allowed to change the loan under SBA rules.
- Access to exclusive PPP funds set aside for sole proprietors, independent contractors, and self-employed individuals in low-to-moderate income areas. This includes home repair contractors, beauticians, small independent retailers, and others.
- Elimination of restrictions that prevent small business owners who are delinquent on their federal student loans from obtaining relief through PPP. The SBA eliminated a previous eligibility restriction to any business with at least 20 percent ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan.
- Elimination of restrictions that prevent small business owners with prior non-fraud felony convictions from obtaining relief through PPP. The SBA eliminated a previous eligibility restriction for any other non-fraud felony convictions within the previous year. A five-year lookback for fraud-related felony convictions remains in effect.
- Additional guidance for non-citizen small business owners who are lawful U.S. residents by clarifying they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief. Current PPP legislation allows lawful U.S. residents may access the program, but additional SBA guidance for ITIN holders like Green Card holders or those on Visas will be forthcoming that will clarify additional details.
- EIDL (Economic Injury Disaster Loan)Advance Change: This eliminates the requirement that recipients of EIDL advances have their PPP forgiveness amount reduced. Borrowers that previously had PPP forgiveness reduced as a result of an EIDL advance will be made whole.
- EIDLs (Economic Injury Disaster Loans) may be refinanced with a new first draw PPP loan.
- Tax Deductibility: The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. Previous IRS guidance stated that such expenses could not be deducted. Borrowers should consult their tax advisor(s) for specific applicability.
- Reapplying for the maximum amount: Some businesses may be eligible to request increases to a PPP loan received in 2020. Additional eligibility rules and guidance from the SBA is available.
Paycheck Protection Program Summary
The Paycheck Protection Program (PPP) is a federal loan program aimed at helping small businesses who have been impacted by COVID-19 retain their workforce. The following includes comprehensive information from the original program, as well as subsequent legislation passed by congress. Customers should also visit the U.S. Treasury website for additional resources and information.
Frequently Asked Questions
Available for businesses “substantially affected by COVID-19,” interpreted as:
- supply chain disruptions
- staffing challenges
- a decrease in sales or customers; or shuttered businesses
Businesses (includes sole proprietorships, 501(c)(3) nonprofit organizations, 501(c)(6) business associations, 501(c)(19) veterans’ organizations, and 31(b)(2)(C) tribal business) with 500 or less employees, whose principal place of residence is in the United States, in operation on February 15, 2020. Certain businesses with over 500 employees may qualify if they meet SBA industry size standards. Business with affiliations may also qualify and should review SBA guidance to determine eligibility.
To be eligible for second draw loans, businesses must have 300 or fewer employees and demonstrate at least a 25% revenue decline.
Maximum loan amount up to $10,000,000, for an initial loan.
Second draw loans max out at $2,000,000.
Funds may be used for:
- Payroll and related cost (administrative, sick leave, group health premiums)
- Mortgage payments
- Interest on debt obligations incurred before February 15, 2020
- Expenditures related to pandemic response or public disturbances in 2020
Loan payments can be deferred for 10 months after the end of the covered period or until a decision on forgiveness is rendered (whichever comes earlier).
Generally, the maximum loan amount will be 2.5 times monthly payroll (250% of average monthly payroll) plus the outstanding EIDL loan amount (not to exceed $10,000,000). Businesses in the hotel and restaurant industry may be eligible for up to 3.5 times monthly payroll (350% of average monthly payroll).
Businesses that received EIDL (Economic Injury Disaster Loans) between February 15, 2020 and April 3, 2020, have the option to refinance these loans under the parameters of the Paycheck Protection Program; the amount of the EIDL loan used for payroll costs must be included in a PPP application.
EIDL advances are no longer required to be deducted from PPP loan forgiveness.
Loan forgiveness amounts are predicated upon maintaining payroll continuity and other allowable costs during the covered periods (24 weeks from loan origination). Calculation of amount forgiven is based on total payroll cost and payments made on debt during covered period; no less than 60% of loan funds must be applied to payroll costs for consideration of full forgiveness, partial forgiveness will be calculated for lesser amounts attributed to payroll costs. Documentation for loan forgiveness will include Federal and State tax filings, financial statements verifying payment of debt obligation and other documentation.
All borrowers may elect to use the original 8-week covered period or a 24-week covered period.
In order to fully qualify for forgiveness, businesses are required to apply a minimum of 60% of loan proceeds to payroll costs with up to 40% reserved for other qualified expenses.
Businesses have until December 31, 2020, to restore workforce levels to maximize forgiveness eligibility. Additional exceptions for loan forgiveness were added for businesses unable to find qualified replacement employees or unable to restore business operations due to COVID-19 operational restrictions.
Borrowers receiving loan approval on or after June 5, 2020 will have five years to repay their loan if they do not qualify for full forgiveness. Borrowers who received funding prior to June 5, 2020 should apply for forgiveness first before requesting a modification of terms for any amount not forgiven.
How can I track the status of my loan?
You can easily track the status of your loan request by logging into the Portal and viewing your dashboard under “YOUR PRODUCTS”.
What if I have login challenges or need to reset my password to the portal?
If you have already created an account for PPP and are unable log-in to the application portal, please use the “Need Help Signing In” function. You will be able to reset your password, unlock your account or obtain a forgotten User ID. Please note this is a different log-in than to your Umpqua Bank online accounts. If you have not yet created an account for PPP, please select the “Sign up” button.
Can you confirm my application was submitted/received?
Customers will receive an email confirmation once they submit their application.
Please check your email, including your spam and junk folders, for this confirmation.
How do I upload documents into the Portal?
You can view step-by-step instructions on how to upload documents here.
What do I need to do if I have duplicate applications?
No further action is necessary on your part. If anything is required to process your loan request, we will contact you via the dashboard portal.
Where can I find my first PPP loan number to complete the application?
Please refer to your first PPP loan note for the loan number. The number is a ten-digit number with a dash before the last two numbers (e.g. 12345678-90).
- SBA resources available HERE, which includes information on:
- The SBA’s 6-month payment relief, which may be available if your business has an existing SBA loan.
What will it take to reemerge?
Check out SOAR for business,
a strategic framework to help you navigate the challenges that come with reopening,
starting over or reimagining your day-to-day operations.