The Paycheck Protection Program (PPP) authorizes up to $349 billion in forgivable loans to small businesses who maintain payroll during the COVID-19 crisis. Funds may be used for employee payroll (including paid sick or medical leave), employee salaries, mortgage interest payments, rent and utilities.
Provides small businesses the opportunity to maintain workforce by providing funds for payroll, mortgage interest, rent and utilities
Interest rate is a flat 1.0% for a max 2-year term. However, full amount may be forgiven (see PPP Loan forgiveness below)
PPP loans are SBA loans, serviced through your local SBA lender – it is recommended to reach out to your primary bank or local lenderfirst
Only one PPP loan can be taken out per business (not per individual)
Personal guarantees are not required
What does this mean for my business?
Businesses may qualify for forgivable loans in order to retain employees.
The SBA can provide up to $10 million OR 2.5 times the average monthly salary over the 1-year period before the loan – whichever is less
Each employee salary may not exceed $100k
These loans may be used for payroll costs (including benefits), interest on mortgage obligations (incurred before Feb. 15, 2020), rent (under lease agreements in force before Feb. 15, 2020) and utilities (for which service began before Feb. 15, 2020)
The first 6 months payment will be deferred, however, the loan will accrue interest
Who Qualifies for a PPP Loan?
All businesses which either:
Have 500 or fewer employees
Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.
Eligible businesses include nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors.
In addition, businesses should show documentation of:
Operation as of February 15, 2020 with paid employees or independent contractors
Necessity of loan to support ongoing operations
Funds will be used for payroll, mortgage obligations, rent or utilities
How Long will PPP Funding Take?
PPP applications will be accepted through your local lender and funding typically takes 2 days from receipt of completed application. Timeline is subject to change based on current volume.
How do I apply for a PPP Loan?
PPP applications will be accepted through your local lender beginning April 3, 2020.
The SBA is continuing to provide guidance to the banks. At this time, we recommend gathering the following:
Copy of your most recent commercial mortgage statement
Copy of your most recent month’s utility statements (gas, electric, water)
To apply with SouthStar Bank, you may submit complete documentation as listed above directly to your local SouthStar Bank loan officer.[/vc_toggle]
PPP Loan Forgiveness
Full loan amounts are eligible for forgiveness if:
The loan proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
Employee and compensation levels are maintained.
Reduction in employment or wages February 15-April 26, 2020 will not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower has re-hired or restored wages
Payroll costs will be prioritized for loan forgiveness and are capped at $100,000 on an annualized basis for each employee. It is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. All loan payments will be deferred for 6 months.
If funds are used for expenses outside of loan terms, this amount will not be forgiven. Forgiveness will also not be granted if staff and payroll are not maintained. Forgiveness could be reduced if:
You decrease your number of full-time employees
You reduce salaries or wages by more than 25% for any employee who made less than $100k in 2019
You have not restored (by June 30, 2020) full-time employment and salary levels for any changes between Feb. 15 and Apr. 26, 2020.
It is highly recommended to open a separate account to deposit loan proceeds in order to show proof that funds are utilized appropriately. This will be crucial in documentation for forgiveness.
6-month deferral available, apply through your current SBA lender
How is my current SBA loan affected?
If you have a current SBA loan, you may apply for a 6-month deferral.
SBA 7(a) or Express Loan – contact your current SBA lender
504 Loan – contact your Certified Development Company (CDC) representative
Your Preferred SBA Lender
PPP loans were specifically designed for the Coronavirus crisis. As a Preferred SBA Lender, our team is here to guide you through this unfamiliar process. Together with the Small Business Administration, our goal is to help you maintain valuable employees and put you in the strongest position possible for a thriving business future.
Alexis Michael
Senior Vice President / Regional Credit Manager / SBA Director
