Paycheck Protection Program
SVB is in the process of submitting the PPP applications we received prior to April 16, 2020. In order to ensure we are able to process as many previously received applications as possible, we are not accepting new PPP applications.
On May 15, the SBA released a PPP Forgiveness Application. The SBA has indicated it will be releasing further guidance, and SVB is currently setting up a process to handle requests for PPP loan forgiveness. When we set a date to accept forgiveness applications, which we expect to be after the SBA’s June 30 program end date, we will inform PPP borrowers. Until then, we are not accepting forgiveness applications.
PPP borrowers have a six-month deferral period from the date of the loan, during which no payments are due on the loan, to the extent not forgiven.
The amount of your PPP loan that will be eligible for forgiveness will depend on the total amount of payroll, mortgage interest, rent and utility costs incurred by the entity that borrowed the PPP loan during the eight-week period after the loan was funded. Accordingly, keeping accurate records of these payments, including records of compensation paid by the borrower directly to eligible employees, will be important. Failure to provide adequate records evidencing these expenses may impact the amount of forgiveness for which you are eligible.
The SBA has provided the following information about PPP loan forgiveness:
- Loan forgiveness is not automatic and must be requested through SVB.
- To be eligible for loan forgiveness, PPP loan proceeds must be used for specified purposes, and at least 75% must be used for payroll costs, as defined by the SBA.
- Not more than 25% of the loan forgiveness amount may be attributable for non-payroll costs.
- Generally, PPP borrowers must maintain their employee headcount and compensation levels during the 8-week period after loan disbursement.
- The amount of loan forgiveness can be up to the full principal amount of the PPP loan and any accrued interest. The actual amount of loan forgiveness will depend, in part, on the total amount of the following uses of the PPP loan proceeds over the eight-week period following the date of the loan disbursement:
- Payroll costs
- Payments of interest on mortgage obligations incurred before February 15, 2020
- Rent payments on leases dated before February 15, 2020 and
- Utility payments under service agreements dated before February 15, 2020
- Loan payments will be deferred for 6 months, but interest will continue to accrue, even if the loan is not forgiven, in part or in full. The borrower will be responsible under the loan for any amounts not forgiven.
- The SBA may limit the timeframe by which you’ll need to ask for forgiveness.
In the interim, we recommend you:
- Visit SBA.gov for information on loan forgiveness.
- Document your expenses, both payroll costs and other eligible expenses incurred directly by the borrower named on the PPP loan note, in the 8 weeks following loan disbursement.
- Review and modify any automatic payments like ACH and automatic debits for the account holding the PPP loan proceeds to ensure those funds are not used for ineligible purposes.
- SVB will email you when you can request loan forgiveness online.
- You will need to certify and provide documentation that you used the loan funds for SBA-eligible purposes.
Please note, it is your obligation, as the borrower, to make sure you understand the SBA's rules. Other eligibility requirements may apply.
The following information is an excerpt about the PPP from the Small Business Administration website for your reference:
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
- Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
- This loan has a maturity of 2 years and an interest rate of 1%.
Learn more about the Paycheck Protection Program at the Small Business Administration website.