URGENT PPP LOAN UPDATE: If you applied prior to 4/3/2020, you must reapply
April 03, 2020
In this article:
- The government has updated its application form for the Paycheck Protection Program loans as of 4/3/2020
- What changed?
- Where you can find help submitting your updated PPP application to an SBA-approved lender
The CARES Act, passed on 3/27/2020 established a $350 Billion stimulus package for American businesses, including the Paycheck Protection Program which will provide up to $10M, potentially forgivable loans to small businesses with fewer than 500 employees.
Many businesses have been scrambling to apply or to find an SBA-approved lender, but it’s VITAL to note that if you have completed your PPP loan application prior to 4/3/2020, you need to apply again using the new form. We recommend you immediately start your application here.
You can re-use your original answers, but if you’ve already filled out your application using the form that was available prior to 4/3/2020, you do need to do it again.
How does the new PPP application form differ from the previous one?
Early on 4/3/2020, the SBA issued a brand new PPP application form. It has new questions, clearer instructions, and new rules.
- The interest rate on all PPP loans went up from 0.5% per year to 1.0% per year.
- The SBA added a couple of new questions to the application on US residency for employees and franchise status
- The SBA reduced the lookback period that would trigger an automatic loan disqualification based on a business Owner’s criminal record. The rule moved from a 7 year lookback to 5 years. This is intended to increase eligibility.
Click here for our full list of FAQs about the SBA’s Paycheck Protection Program.
How can I find an SBA-approved lender to accept my new Paycheck Protection Program application?
April 3, 2020 is the first day that the government is allowing SBA approved lenders to begin accepting PPP loan applications. However, as of 4/3/2020, most banks are not yet ready to lend, especially since the government just barely updated the application form early in the morning of 4/3.
This means many SBA lenders are waiting on guidance from the government and will need time to incorporate the brand new application into their systems.
If you’re confused about where to go to get your PPP application submitted, or would like help finding an SBA-approved lender that’s right for your business, Womply can help.
10 things you should know about the Paycheck Protection Program loan
What documents do I need to get an emergency SBA loan for my business?
Please see a checklist here. We recommend at a minimum:
- W-9 Tax ID document
- Proof of being operational by 2/15/2020 (You may be able to confirm this with the payroll records from a period that includes 2/15/2020 or a payroll summary.)
- 2018 and 2019 tax returns (or latest available)
- Legal documents for your business (Charter, state licenses, Articles of organization)
- Payroll records for Jan 1, 2019, to present (Forms 940 and/or 941)
- A list of all owners with greater than 20% ownership stakes in your business
- Online banking credentials. This will be used to verify ownership if you are approved for a loan.
- Clean up your books. To apply for loan forgiveness in the future, you’ll need to document the expenses you pay during the eight week period after you receive an SBA PPP loan. Make sure you’re prepared to document expenses, including payroll, mortgage interest, and/or rent and utilities.
Do I have to pay back Paycheck Protection Program (PPP) loans?
The Paycheck Protection Program provides forgivable emergency loans.
The program is designed to save American jobs, so businesses are heavily incentivized to keep and rehire employees.
As a result, if you spend your loan on approved business expenses such as payroll (and a percentage can also go toward rent, mortgage interest, and utilities), then the government will forgive your loan so you don’t have to pay it back.
Forgiveness is based on the businesses maintaining current employment levels and/or quickly rehiring employees they may have had to let go due to the COVID-19 crisis, as well as maintaining salary levels. Forgiveness will be reduced partially or fully if full-time headcount declines, or if compensation decreases.
Are all small businesses eligible for PPP loans?
Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible.
Want to know how much you may qualify for? Check out our PPP calculator
\Businesses with more than 500 employees are eligible in certain industries.
What do I need to do to receive a Paycheck Protection Program loan?
You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020.
We recommend completing and submitting your application as soon as possible because there is a funding cap and lenders need time to process your loan. Analysts estimate there will be more than $1 trillion in demand and this program only has $350 billion in appropriation.
Do I need to first look for other funds before applying for a PPP loan?
No. The government is waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources (i.e., the Credit Elsewhere requirement).
What can I use PPP loan money for?
You should use the proceeds from these loans on:
- Payroll costs, including benefits
- Interest on mortgage obligations, incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which service began before February 15, 2020
How much can I borrow under the Paycheck Protection Program?
Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap.
If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs are capped at $100,000 annualized for each employee.
How much of my PPP loan can be forgiven?
You will owe money when your loan is due if you use the PPP loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.
Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
What is my interest rate and how long do I have to pay it back?
1.00% fixed rate. All payments are deferred for 6 months, and the loan is due in 2 years unless it has been forgiven under the terms of the PPP.
Do I need to put up any collateral for a PPP loan?
No. No collateral is required.
For a complete list of FAQs relating to PPP loans, click here.
Couldn’t find your question? Here’s a link to the detailed rules directly from the government.
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