The US Small Business Association, with support from the Department of Treasury, implemented the Paycheck Protection Program (“PPP”), authorizing up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Please note the application phase for the program ended on August 8, 2020.
Loan Forgiveness Guidance
The SBA has partnered with a financial services technology provider to make available a secure platform (the PPP Forgiveness Platform) for lenders like VEDA to use to submit forgiveness decisions to the SBA. This platform is beginning to accept Lender submissions in August, but there is no rush to complete your application. VEDA will email its PPP borrowers once the process is securely in place and we can accept applications.
Borrowers can prepare for this by reading the instructions below and beginning the appropriate application for your business.
There are three PPP Loan Forgiveness Applications and corresponding instructions from the SBA. To apply for Loan Forgiveness, complete one of these three applications and email with appropriate documentation to the VEDA Loan Officer that reviewed your PPP application or to email@example.com.
Good news: on October 9, the SBA released a new simpler version of the PPP Forgiveness Application, Form 3508S. It is available for borrowers that have a PPP loan of $50,000 or less:
- Download PPP Loan Forgiveness Application - Simple Form 3508S
The Form 3508EZ version of the Forgiveness Application is available for borrowers with loans greater than $50,000 and 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 hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
- Download PPP Loan Forgiveness Application - Form 3508EZ
All other PPP borrowers applying for Forgiveness on their PPP loans, please select and use the following Forgiveness Application:
The program provides small businesses with loan amounts up to 2.5 months of average payroll costs including benefits. Self-employed individuals and sole proprietors may include in payroll a proportionate (2 1/2 months) amount of annual income based on income in 2019. Loan funds may be used to pay actual payroll costs, interest on mortgages, rent, and utilities during the "Covered Period." The Covered Period begins on the date the loan is funded and continues for 24 weeks. In previous legislation the Covered Period was only 8 weeks.
Loans may be forgiven by the SBA in full or partially based on the employer using 60% of the loan funds to pay payroll expense during the Covered Period (previously this was 75%).
- Your business was in operation prior to February 15, 2020 and had employees for whom you paid salaries and payroll taxes.
- Eligible for small businesses with 500 or fewer employees, including 501 (c) (3) or (c) (19) nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors.
- Businesses with more than 500 employees in the food services and accommodations industries (NAICS starting with 72) are eligible.
Loan Terms, Rates & Fees
- Loan Amount: Loans can be for up to 2.5 times your average monthly payroll costs from the last year. That amount is subject to a $10 million cap. Payroll costs are capped at $100,000 on an annualized basis for each employee.
- It may also include the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).
- Learn how to calculate your loan amount, organized by business type, with this guide from U.S. Treasury.
- Interest Rate: 1% fixed rate
- Forgivable Amount: Loan amounts will be forgiven as long as proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the Covered Period after the loan is funded; and if employee and compensation levels are maintained or restored.
- At least 60% of the PPP loan must be spent on documented payroll costs during the Covered Period. You may use up to 40% of the PPP loan, but not more, on other eligible non-payroll costs.
- You may owe money if you do not maintain your staff and payroll, or if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- You will have a limited time to fully restore your employment levels and payroll costs in order to receive forgiveness of the full loan amount (there is some new flexibility on this if you are unable to fully operate your business or rehire employees by the end of the Covered Period).
- Collateral: No collateral is required.
- Guarantees: There is no personal guarantee requirement.
- Fees: There are no fees associated with PPP loans.
- Term: New PPP loans will have a 5-year term. There are no prepayment penalties or fees.
- Payment Deferral Period: No payments due prior to the SBA determination of Forgiveness on a loan, or up to 10 months.
Applications are no longer being accepted. If you have questions and need to speak to a loan officer, please fill out our Contact Us form or call (802) 828-5627.