Paycheck Protection Program
Below is a non-exhaustive summary of guidance provided by the SBA regarding the Paycheck Protection Program and revisions made to it by the Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”). This guidance from the SBA is expected to evolve and change as the SBA provides additional guidance. We encourage borrowers to refer to Treasury.gov or SBA.gov for the latest guidance, forms and FAQs.
- Borrowers with loans approved by the SBA before June 5, 2020 will be able to choose between an 8-week and a 24-week Covered Period when applying for loan forgiveness starting, in each case, as of the date loan funds were disbursed.
- Borrowers with loans approved by the SBA after June 5, 2020 will only have a 24-week Covered Period.
- During the Covered Period, borrowers must use at least 60% of PPP loan proceeds for eligible payroll costs to qualify for full Loan Forgiveness, down from 75% under the initial forgiveness framework.
- Borrowers can use up to 40% of funds for eligible non-payroll costs, up from 25% under the initial forgiveness framework.
- If a borrower applies for PPP loan forgiveness, the borrower won't have to start making payments on the outstanding PPP loan until the SBA makes a decision with respect to forgiveness eligibility or remits the forgiveness amount to SVB. If a borrower seeks forgiveness of its PPP loan, they will generally have to submit a forgiveness request within 10 months after the 24-week Covered Period ends (even if the borrower elects the 8-week period).
- If a borrower does not apply for forgiveness, they won’t have to start making payments until 10 months after the 24-week Covered Period ends.
- Borrowers may be able to use FTE Safe Harbor provisions if they have fewer full-time equivalent (FTE) employees now than when they applied for the PPP loan, if they can document an inability to:
- Rehire individuals who were employees as of February 15, 2020
- Hire similarly qualified employees for unfilled positions on or before December 31, 2020
- Return to the level of business activity they had before February 15, 2020 due to compliance with requirements or guidance from the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration from March 1, 2020 through December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19
- The SBA provided an updated PPP forgiveness application form and an “EZ” forgiveness application form for eligible borrowers. The “EZ” form requires fewer forms and calculations, but a similar level of documentation. It applies to borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or average hours of their employees between January 1, 2020 and the end of its Covered Period; OR
- Experienced reductions in business activity as a result of federal health directives or guidance related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
What should PPP loan recipients do prior to the forgiveness process starting?
Borrowers should monitor SBA.gov for the latest guidance on loan forgiveness. SVB also recommends that you:
- There is no need to complete either form; Silicon Valley Bank is developing an online application, and we will not accept paper or PDF forgiveness applications.
- Evaluate your options to determine when it is best for your business to apply for forgiveness when SVB starts taking applications. Please note that the SBA may provide further guidance regarding PPP loans and the forgiveness process in the coming weeks.
- Many payroll services companies or professional employer organizations (PEO) are producing special reports that document payroll expenses during the covered period. Inquire with them to see if a sample report is available now or planned for release. This could streamline your documentation requirement.
- Document expenses, both payroll costs and other eligible expenses incurred directly by the borrower named on the PPP loan note during the covered period.
- 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.
- The AICPA also has additional guidance.
What are the next steps in the process?
SVB will email you when you can request loan forgiveness online. We are developing a digital process to handle PPP loan forgiveness applications. When we set a date to accept forgiveness applications, which we expect to be in late July or early August, we will inform all PPP borrowers directly. Until then, we are not accepting forgiveness applications, even for borrowers that have completed their 8-week covered period.
You will need to certify and provide documentation that you used the loan funds for SBA-eligible purposes. It is your obligation, as the borrower, to make sure you understand the SBA's rules and that your application is true, complete and correct, and complies with the SBA’s requirements for forgiveness. Loan forgiveness is not automatic and must be requested through Silicon Valley Bank. Other eligibility requirements may apply.
Please note: Our client support team has no further information on PPP loan forgiveness at this time. We ask that you wait for us to contact you with next steps and timing for when you can request loan forgiveness through Silicon Valley Bank.
For more information, please visit our FAQs page.