June 11, 2020

SBA PPP Loan Program Status Update and Next Steps

Update Tuesday, 06-09-20 6:32PM (CST)

President Trump signed the H.R.7010 – Paycheck Protection Program Flexibility Act of 2020 (PPPFA) into law on June 5, 2020. The PPPFA makes several sizable modifications related to the forgiveness of loans under the Paycheck Protection Program.

Limitation On Forgiveness

Per the PPPFA, an eligible borrower must use at least 60 percent of the covered loan amount for payroll costs as opposed to the initial 75 percent to receive loan forgiveness. Thus increasing the amount spent on “eligible expenses” from 25 percent to 40 percent.

Extended Covered Period and Rehire Forgiveness Guidelines

The “covered period” refers to the timeframe in which loan proceeds must be used following the date the funds were disbursed. The original 8-week allotment has been extended to 24 weeks. However, the PPPFA does allow borrowers that received a PPP loan prior to June 4, 2020 to keep the original eight-week covered period to spend loan proceeds if they choose.

Those that prefer to use the longer period will now have until December 31, 2020 to restore wage and full-time equivalent employees. The PPPFA provides relief to employers by clarifying that loan forgiveness will not be reduced based on an inability to rehire employees if the employer can provide documented proof that shows offers to rehire individuals who were employees of the company on February 15, 2020; or an inability to hire similarly qualified employees for unfilled positions by December 31, 2020; inability to return to the same level of business activity as existed prior to February 15, 2020 due to COVID-19-related requirements from the Health and Human Services (HHS), the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration (OSHA) between March 1 and December 31, 2020.

Extended Deferral and Repayment Period

The PPPFA extends the deferral period until the date the lender receives the applicable forgiven amount from the SBA. Currently, a lender has 60 days to make a forgiveness determination and submit it to the SBA for final approval. The SBA has an additional 90 days to remit the payment of the loan to the lender.

Additionally, it clarifies that if a borrower fails to apply for forgiveness within 10 months after the last day of the covered period, the deferral period will not be more than 10 months after the last day of the covered period.

PPP loans that were funded before 6/5/20

Under the rules issued by the SBA, payments of principal and interest are deferred for a period of six months from the date on which the PPP loan was disbursed.

Extension of Maturity For New Loans

In the event the PPP loan or a portion of the PPP loan is not forgiven for new loans approved after 6/5/20, a borrower will have a minimum of five years to repay the loan. instead of the initial two year maturity term. However, any PPP loan approved and/or funded before 6/5/20 will be held to the initial two year maturity term.

What Now?

Although some lawmakers have expressed an intent to seek further changes and clarifications to the PPPFA in the coming weeks, Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza released a joint statement regarding the enactment of the Paycheck Protection Program Flexibility Act on June 8, 2020.

Our business team continues to monitor this evolving information. To date, the SBA application and calculation form have NOT been updated with the new regulations passed in the FFFPA. We will continue to update our borrowers with forgiveness qualification and a streamlined way to apply for forgiveness as as more information becomes available from the SBA.

Updated Thursday, 05-14-2020 5:02PM (CST)

As of May 14, 2020. Tulsa FCU is no longer accepting PPP applications.
Our staff will continue to work diligently to process and prepare any previously received applications for SBA approval before funding is fully committed.

Please note: Application submission does not guarantee approval.

Updated Fri. 04-24-2020 2:15PM (CST)

In an effort to help small businesses remain afloat, Congress has passed another COVID-19 relief package which allocates $310b to the Paycheck Protection Program (PPP).

The PPP ran dry last week after more than 1.6 million businesses across the country applied for relief loans. The Small Business Administration (SBA), the agency responsible for granting the loans under the PPP, has already approved more than $342 billion in loans since the pandemic hit.

Another crucial component of the bill is its inclusion of smaller, underbanked businesses. The new bill will designate $60 billion for smaller lending facilities, including “community financial institutions, small insured depository institutions and credit unions with assets less than $10 billion.”

This is great news for credit unions which will now have access to the funds they need to help their members who own small businesses.

So, what does this process look like? Here is a breakdown of events:

  1. The US Senate passed the new bill on Tuesday, April 21, 2020.
  2. The House passed the bill on Thursday, April 23, 2020.
  3. The President signed the emergency interim coronavirus relief package into law on Friday, April 24, 2020.
  4. Backlogged applications submitted to SBA’s processing system, E-Tran, prior to April 16, 2020 when they suspended accepting new applications.
  5. On Monday, April 27, SBA will re-open E-TRAN allowing lenders to submit applications on behalf of the applicants. 
  6. Financial Institutions will begin submitting applications to SBA’s E-TRAN system. Each lender’s application process and timelines will vary. At Tulsa FCU, our commercial team will be diligently working through the following status categories.
    1. 1st round – those applications that have been processed through initial underwriting and all required documentation is received.
    2. 2nd round – those applications currently in underwriting.
    3. 3rd round – those applications in queue for underwriting that have also submitted the necessary payroll documentation for their loan amount.
    4. 4th round – applications received after April 16, 2020.
  7. Once an application is submitted to the SBA’s ETRAN system, it will be processed and approved unless an error is identified. If there is an error, the application process may be delayed or potentially declined.

Expert Tip: Make sure you have provided your lender with the needed documentation for underwriting and SBA submission. This one simple task can make a major impact on how quickly your application can be processed and your loan funded.

If you did not provide this information with your application, prepare the following documentation and send to your lender.

  1. Driver’s License for all owners with 20%+ share in the business: A color copy of the front and back of a valid (unexpired) Driver’s License for each owner.
  2. Any documentation that can prove your payroll expenses. Acceptable Payroll Documents (listed in order of what seems to be the SBA’s preference):
    1. For businesses applying for a PPP Loan
      1. 941 Quarterly Tax Filings (2019, 2020 Q1)
      2. 944 Annual Tax Filings (2019)
      3. Payroll Register for the previous 12 months
      4. 12 months most recent bank statements
    2. For 1099 Independent Contractors or self-employed individuals applying for a PPP loan:
      1. IRS 1040 Schedule C
      2. 1099s (under which you were paid)
      3. Income and expense reports for 2019
    3. Don’t have any way to show payroll? Some lenders will accept the Business account’s bank statements as a last resort.