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On June 5th, the Paycheck Protection Program Flexibility Act became law, addressing some program restrictions. With these changes, an NSB application deadline of 3pm on August 7, and limited federal funding remaining, we anticipate renewed volume of applications and strongly recommend interested customers apply now. To get started, download the application and, if practical, work with a tax advisor to calculate your loan amount and gather required documentation. Once you have completed the application and gathered required documentation, click SUBMIT to begin a secure email method of submission. If you receive an error message, please click here for email instructions.
NSB is following U.S. Treasury and Small Business Administration guidance in originating, processing, and disbursing PPP loans. That guidance requires banks to disburse funds to SBA-approved PPP borrowers no later than 10 calendar days from loan approval.
Paycheck Protection Program FAQs
NSB provides answers to some basic PPP questions below. The U.S. Treasury publishes detailed PPP rules and updates HERE.
WHAT IS THE PAYCHECK PROTECTION PROGRAM?
The Paycheck Protection Program (PPP) is a small business loan relief program authorized by the CARES Act, funded and overseen by the U.S. Treasury Department (Treasury) and administered by the U.S. Small Business Administration (SBA). PPP provides small businesses forgivable loan funding to cover payroll costs and other critical expenses incurred during the COVID-19 national emergency. The first round of funding was $349 billion; it was fully subscribed by April 16. The second round of funding is $310 billion; it became available on April 27. The loan application deadline is August 8, 2020, and PPP loan funds may be utilized until December 31, 2020.
WHEN ARE PPP LOANS AVAILABLE?
- Second round funding became available on April 27
- NSB application deadline of 3pm August 7
- Funding on a first-come, first-served basis nationally until fully subscribed
CAN MY BUSINESS APPLY FOR A PPP LOAN THROUGH NORTHFIELD SAVINGS BANK?
Yes, Northfield Savings Bank is originating and servicing the Paycheck Protection Program, responding to all inquiries. Applications from NSB customers and Vermont-based businesses will be accepted until August 8 deadline or when federal funding is depleted, whichever comes first. Please follow the steps outlined at the top of this page to submit your application.
WHO IS ELIGIBLE FOR PPP FUNDING?
Eligible businesses with 500 or fewer employees can apply for a PPP loan. This includes:
- Corporations
- Nonprofits
- Veterans organizations
- Tribal business concerns
- Sole proprietorships
- Self-employed individuals
- Independent contractors
- Partnerships
Certain businesses with more than 500 employees might also meet SBA eligibility requirements. SBA provides those details HERE.
ARE PPP LOANS FORGIVABLE? WILL MY BUSINESS NEED TO PAY BACK THE LOAN PROCEEDS?
PLEASE NOTE: FORGIVENESS RULES WERE CHANGED WITH THE PASSAGE OF THE PPP FLEXIBILITY ACT ON JUNE 5. THE INFORMATION BELOW HAS BEEN UPDATED TO REFLECT THE CHANGES.
Any unforgiven portion of PPP proceeds is a loan with principal and interest that must be paid back.
PPP’s primary purpose is to provide support for small business payroll costs. No more than 40% of the forgiven amount may be for non-payroll costs.
PPP loan amounts will be forgiven provided:
- Loan proceeds are used to cover payroll costs and most mortgage interest, rent, and utility costs during the 24 week covered period after loan funds are disbursed; and
- Employees are retained and their compensation levels are maintained. Some exceptions are made for companies who attempt to rehire or replace laid-off employees but are unable to do so.
Loan proceeds used for non-approved purposes will not be forgiven.
For example, if loan funds are disbursed on June 15, 2020, borrower has 24 weeks, until November 30, 2020, in which to use the funds for approved purposes. In this example, funds utilized after November 30, 2020 will not be eligible for forgiveness.
HOW DO I APPLY FOR LOAN FORGIVENESS?
Borrowers may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of their covered period – provided they have used all of the loan proceeds for which they are requesting forgiveness. Borrowers who do not apply for forgiveness within 10 months of the end of their covered period will then begin to make payments on their loan balance. Forgiveness applicants must submit a complete forgiveness application along with supporting documentation. Because applications include sensitive information, submission via standard unsecured email is discouraged. NSB will accept forgiveness applications but will not be able to process them until Treasury and the SBA release a forgiveness application processing system and rules.
Although borrowers who received PPP loans prior to June 5, 2020 may choose to utilize their original 8 week covered period, we encourage borrowers to utilize the full 24 week covered period available under the new PPP Flexibility Act rules. Once the processing system and rules are released, NSB will provide borrowers a secure way to submit their applications.
Many borrowers will be able to apply using a simplified “EZ” forgiveness application form. To determine if you can use the EZ form, refer to this brief questionnaire.
FORGIVENESS APPLICATION FORMS AND INSTRUCTIONS:
WILL FORGIVENESS AMOUNTS BE REDUCED IF THE BORROWER IS UNABLE TO REHIRE OR REPLACE LAID-OFF EMPLOYEES?
No, provided the borrower adequately documents:
- An inability to rehire former employees and an inability to hire similarly qualified employees; or
- An inability to return to the same level of business activity due to compliance with federal COVID-19 requirements or guidance.
WHAT ARE THE TERMS FOR UNFORGIVEN PORTIONS OF PPP LOANS?
PLEASE NOTE: LOAN TERMS WERE CHANGED WITH THE PASSAGE OF THE PPP FLEXIBILITY ACT ON JUNE 5. THE INFORMATION BELOW HAS BEEN UPDATED TO REFLECT THE CHANGES.
Any unforgiven portion of PPP proceeds is a loan with a fixed interest rate of 1% and full payment due in 5 years. Loan payments are deferred until the date any forgiven amount is paid by the SBA to NSB, but interest will continue to accrue over this period. There are no prepayment penalties or fees.
DO I NEED TO TRY TO GET OTHER FUNDING BEFORE I CAN APPLY FOR PPP?
No. Previously the SBA has required small businesses to try to obtain some or all of their loan funding from other sources. For PPP, this “Credit Elsewhere” requirement has been waived.
HOW MUCH CAN MY BUSINESS BORROW UNDER PPP?
Maximum PPP loan amount is average monthly payroll costs from the last year multiplied by 2.5. Total loan amount will not exceed $10 million. Seasonal or new businesses will use different methods to calculate payroll costs. An annualized compensation cap of $100,000 per employee factors into payroll cost calculation. The PPP Flexibility Act does not change loan amount calculation rules. Borrowers now have a 24 week covered period in which to utilize their loan proceeds for allowed purposes. The SBA is not allowing changes to existing loan amounts for Borrowers who claim they relied, to their detriment, upon PPP rules in effect when they calculated their loan amount.
HOW DOES A BUSINESS CALCULATE ITS MAXIMUM LOAN AMOUNT?
Treasury provides detailed guidance on how to calculate maximum PPP loan amounts for self-employed, partnerships, S corporations, C corporations, LLCs, and nonprofits.
The following methodology may be useful for many applicants.
Step 1: Aggregate 12 months of payroll costs from the year 2019 for employees whose principal place of residence is the United States.
Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.
Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
The examples below illustrate this methodology.
Example 1 – No employees make more than $100,000
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Maximum loan amount is $25,000
Example 2 – Some employees make more than $100,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of
$100,000: $1,200,000
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
Maximum loan amount is $250,000
WHAT DOCUMENTATION AND CERTIFICATION DOES PPP REQUIRE?
Applicants must submit the following documentation to NSB:
- Paycheck Protection Program Application
- Certification of Beneficial Owner(s) Form – only applicable if borrower is a new customer of NSB
- Regulation B Form - only applicable if more than one borrower will be listed on the loan application
- Documentation to establish eligibility such as payroll processor records, payroll tax filings, Form 1099-MISC, or income and expenses from a sole proprietorship. Borrowers lacking such documentation must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
The application requires borrowers to make the following good faith certifications:
- The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.
- Current economic uncertainty makes the loan necessary to support your ongoing operations. (Any borrower that, together with its affiliates, received PPP loans of less than $2 million will be deemed by the SBA to have made this certification in good faith.)
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- You have not and will not receive another loan under this program.
- You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 24 weeks after getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 40% of the forgiven amount may be for non-payroll costs.
- All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
DOES A PPP LOAN REQUIRE FEES, COLLATERAL OR A PERSONAL GUARANTY?
No fees will be charged and no collateral is required. No personal guaranty is required, but the U.S. Government will pursue criminal charges against borrowers who use PPP proceeds for fraudulent purposes.
WILL THE SBA REVIEW INDIVIDUAL PPP LOANS?
Yes, the SBA will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.