About the Payroll Protection Program
- The PPP is providing 100% federally-guaranteed loans, administered by the Small Business Administration (SBA) through its SBA-approved lenders.
- PPP loans are intended to allow employers to maintain their payroll during this crisis. If employers retain employees and maintain their payroll, the loans will be forgiven, which will help workers remain employed as well as help small businesses and our economy bounce back sooner.
- PPP has a host of attractive features such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees, and at least 6 months of deferral (although interest will continue to accrue).
- Small businesses and other eligible entities will be able to apply if they were harmed by the COVID-19 pandemic between February 15, 2020 and June 30, 2020. This program would be retroactive to February 15, 2020, to help reinstate workers who may have already been laid off.
- PPP loans are available through June 30, 2020.
What types of businesses and entities are eligible for a PPP loan?
- Businesses and entities must have been in operation as of February 15, 2020.
- Small businesses, 501(c)(3) nonprofit organizations, 501(c)(19) veterans organizations, or Tribal businesses with <500 employees (or the applicable size standard in number of employees for the North American Industry Classification System [NAICS] industry as provided by SBA, if higher).
- Individuals who operate a sole proprietorship, independent contractors, and eligible self-employed individuals.
Affiliation rules and waivers
Affiliations exist when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses.
Typical SBA affiliate rules are being waived for PPP loans made to small businesses:
- in the hotels and food services industries (NAICS code beginning with ’72’)
- that are in the SBA’s Franchise Directory
- that receive funding through a Small Business Investment Company (SBIC) licensed by the SBA.
Additional guidelines may be forthcoming.
How is the loan amount determined?
- Depending on your business, the loan amount will be calculated in different ways. The maximum loan size is always $10 million.
- If you were in business as of February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
- If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.
Costs included in ‘payroll costs’
- Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for the provisions of group health care benefits, including insurance premiums
- Payment of any retirement benefit
- Payment of state or local tax assessed on the compensation of employees
Costs not considered ‘payroll costs’
- Employee/owner compensation over $100,000
- Taxes imposed or withheld under Chapters 21, 22, and 24 of the IRS code
- Compensation of employees whose principal place of residence is outside of the U.S.
- Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
What are allowable uses of loan proceeds?
- Payroll costs (as noted previously)
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensations (see exclusions as noted previously)
- Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
- Rent under a lease agreement
- Interest on any other debt obligations incurred before February 15, 2020
Loan term, interest rate, and fees
- For any amounts not forgiven, the maximum term is 2 years and the maximum interest rate is 0.5 percent
- No loan fees
- No prepayment fee
- SBA will establish application fee caps for lenders that charge
How is the forgiveness amount calculated?
Forgiveness on a covered loan is equal to the sum of:
- Documented payroll costs (excluding compensation over $100,000)
- Covered mortgage interest, rent, and/or utilities payments
*Due to anticipated strong interest and participation in the PPP, it is anticipated that <25% of the forgiven amount may be used for non-payroll costs.
How do I get forgiveness on my PPP loan?
- You must apply through your lender for forgiveness on your loan. In this application, you must include:
- Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and state income, payroll and unemployment insurance filings.
- Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.
- Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.
What happens after the forgiveness period?
- Any loan amounts not forgiven are carried forward as an ongoing loan with maximum terms of 2 years, at a maximum interest rate of 0.5%.
- Principal and interest will continue to be deferred, for a total of 6 months to 1 year after disbursement of the loan.
- Interest, however, will continue to accrue over the period of deferment.
Can I get more than one PPP loan?
- No. Each entity is limited to one PPP loan.
- Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity.
Where should I go to get a PPP loan?
- As part of the SBA’s Preferred Lender Program, and one of the Top 5 SBA Lenders by volume in the Greater Philadelphia area, Meridian Bank is working to quickly deploy PPP dollars to small businesses to ensure that today’s businesses are a part of tomorrow’s thriving economy.
To learn more, contact: email@example.com
How does the PPP loan coordinate with SBA’s existing loans?
- Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from SBICs.
- You cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP loan to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for those same costs in that period, although you could use it for payroll during a different period or for different workers.
How does the PPP loan work with the temporary Emergency Economic Injury Grants and the Small Business Debt Relief program?
- Emergency Economic Injury Grant and Economic Injury Disaster Loan (EIDL) recipients and those who receive loan payment relief through the Small Business Debt Relief Program may apply for a PPP loan as long as there is no duplication in the uses of funds.
Paycheck Protection Program (PPP) Loans Explained
Click here to watch a previously-recorded webinar with Rocco Perate, SVP of SBA Lending at Meridian Bank, as he explains the new government funding options for small businesses, and answers questions from Delaware Valley business owners about how they can tap into these dollars.
About Rocco Perate
- Recognized as one of the deans of the local SBA lending community, Rocco Perate has over 25 years of experience in the Philadelphia area and national business lending community. In that time he has helped finance over $1 billion in SBA loans, assisted thousands of small businesses, and created or helped to retain thousands of jobs in the small business community in our region.
- Rocco joined Meridian in 2018 to lead and expand its SBA lending division. By 2019, Perate successfully secured Preferred SBA Lending Status for Meridian, and led the Bank to become the 5th largest SBA lender in the Greater Philadelphia region, closing over $30 million in 7a loans that year. Today, as SVP of SBA Lending at Meridian, Rocco and his ten-person team have established Meridian as a top SBA lender in the tristate region.
About Meridian Bank
- Meridian is an innovative, full-service community bank founded in 2004 by local entrepreneur Chris Annas. Headquartered in Malvern, Meridian specializes in serving the small to medium sized business community with a robust and hi-tech digital business banking platform, coupled with veteran commercial lenders who have the authority to act quickly to help business owners grow their enterprise. Since Meridian’s successful IPO in 2017 (NASDAQ: MRBK), the Bank has grown to over $1B in assets, and has more than 20 locations across its footprint in Pennsylvania, Delaware and New Jersey. In December 2019, the bank successfully raised $40MM in subordinated debt, which will be used to fuel growth.