The U.S. Small Business Administration released amendments, rules and additional guidance to the Paycheck Protection Program this week and we wanted to provide the following information to you as you may consider taking advantage of some of the changes. The takeaways are as follows:
Filing for PPP Loan Forgiveness:
At this time the Bank is finalizing our development of an on-line portal whereby all PPP Borrowers may apply for and submit the supporting documentation required to apply for forgiveness. Due to the recently released amendments, we are delayed in rolling this portal out and expect to have it available to you by the second week of July.
Those borrowers that are unable to access the portal will be provided alternative avenues to apply for PPP loan forgiveness. In an effort to manage the workload associated with the forgiveness process, the Bank will be inviting PPP Borrowers to the forgiveness portal based on the closing date of your PPP loan. At that time if you have exhausted your PPP loan funds and have not come to the end of your covered period, you may still apply for loan forgiveness.
PPP Program Amendments:
All loans closed prior to June 5, 2020 were extended with the following terms:
- a 24 month term
- an 8 week covered (spending) period
- 6 months of deferred payments and
- A 75/25 use of funds ratio whereby 75% of the loan proceeds were to be used to support eligible payroll costs and 25% may be used to support mortgage interest expense, rent / lease payments, and / or utility expenses
The program was amended so that any PPP loan closed on or after June 5, 2020 was extended with the following terms:
- a 60 month term
- a 24 week covered (spending) period
- 10 months of deferred payments and
- A 60/40 use of funds ratio whereby 60% of the loan proceeds were to be used to support eligible payroll costs and 40% may be used to support mortgage interest expense, rent / lease payments, and / or utility expenses
Any PPP Borrower that closed a PPP loan prior to June 5, 2020, has the choice to retain the terms whereby the PPP loan was extended or may amend the terms of the PPP loan to take advantage of the amended terms. Should you elect to do so, please contact the commercial loan officer assigned to your County for more information and to process your modification. There is no fee associated with this modification.
Refinancing EIDL Loans With PPP Loan Proceeds:
This provision
ONLY
applies to PPP Borrowers that received an EIDL loan through the U.S. Small Business Administration. The recently released guidelines illustrate the following:
- An EIDL loan may not be refinanced with a PPP loan when:
- The PPP Borrower received the EIDL loan before January 31, 2020 or after April 3, 2020
- An EIDL loan is not required to be refinanced with a PPP loan when:
- The PPP Borrower received funds from an EIDL loan from January 31, 2020 through April 3, 2020; AND
- The PPP Borrower used the EIDL loan for purposes other than payroll costs
- A PPP loan must be used to refinance the full amount of an EIDL loan when:
- The PPP Borrower received funds from the EIDL loan from January 31, 2020 through April 3, 2020; AND
- The PPP Borrower used the EIDL loan funds to pay payroll costs
The amount of the EIDL loan to be refinanced does not include the amount of any EIDL “advance” (i.e. “grant”) received by the PPP Borrower, because this EIDL advance does not need to be repaid. According to the outlined provisions, if you are required to repay a portion or all of the EIDL loan proceeds received, please contact the commercial loan officer assigned to your County for more information and the process to repay the same.
FTE Reduction Safe Harbors:
To avoid reduction of the PPP loan forgiveness amount, the SBA provided the following clarification:
- Unfilled positions:
- Borrowers who are able document an inability to rehire employees employed on February 15, 2020 or an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 can avoid an FTE reduction providing that the borrower maintained the written offer to rehire, the written record of the rejection, and a record of the efforts the borrower took to hire a similarly qualified worker to satisfy this safe harbor.
- Decline in activity:
- Borrowers can also avoid an FTE reduction if they can document the inability to return to the same level of business activity as they were operating at on February 15, 2020 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers of Disease Control and Prevention or the Occupational Safety and Health Administration related to the maintenance of standards of sanitation, social distancing or any other work or customer safety requirements related to COVID-19 that was issued between March 1, 2020 and December 31, 2020.
- We suspect that further guidance will be released to clarify the supporting documentation that the borrower must submit to support this provision
Please find a list of Farmer National Bank officers and staff who are assigned to specific geographic areas and stand ready to assist in answering any questions that you may have regarding the PPP program and subsequent forgiveness process. As we receive additional clarifications and rules from the SBA, we will continue to provide updates via email distributions.
I trust that you remain safe and well.
Warm Regards,
Robert A. Vernick
Senior Vice President
Chief Lending & Bus. Dev. Officer
NMLS# 977437
