FAQs: Paycheck Protection Program (PPP)

What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program (PPP) is a loan program that originated from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020. This is a program for the U.S. Small Business Administration (SBA) to guarantee loans to small businesses. The first round of PPP funding totaled $349 billion and the second round of funding totals $310 billion. Funds currently remain available for new applications.

How can a PPP loan help my business?

A PPP loan is a unique and favorable financial tool to help your business during the coronavirus pandemic. The PPP loan has been designed to cover an 8-week period of time to help cover payroll costs and other essential business expenses. If you use the loan as intended by the SBA and apply for and receive loan forgiveness, you don’t have to pay your PPP loan back!

What is the deadline to apply?

As set forth by the SBA, the deadline to have a PPP loan approved was June 30, 2020.

How do I apply?

The application deadline passed on June 30, 2020.

What are the terms of PPP Loans?

There are no fees and neither collateral nor personal guarantees are required. All loans will accrue interest at 1% fixed annually. Payments are deferred initially. You may request forgiveness for part or all of the loan amount. Any amount of the loan that is forgiven essentially becomes a grant that does not need to be repaid. Any amount of the loan that is not forgiven must be repaid.

Who qualifies for a PPP loan?

All small businesses can apply, including self-employed individuals who filed a 2019 Schedule C tax return. Documents on the business legal structure and tax reporting are required. Businesses operated by undocumented residents who do not have a Social Security Number (SSN) are not eligible. Businesses that started after February 15, 2020 are not eligible to apply.

How much funding can I receive?

The maximum amount you can receive from your SBA-approved lender is your monthly average payroll cost multiplied by 2.5, up to a maximum of $10 million. Not all PPP lenders are able to consider requests up to the $10 million maximum. DreamSpring can make PPP loans up to a $250,000 maximum.

Can a business apply to multiple lenders, and is there a penalty for doing so?

Yes, you may apply with more than one lender. No, there is no penalty. However, only one lender can reserve funds for a business, using the Federal Employer Identification Number (EIN), in the SBA’s E-Tran system. Businesses may only take out one PPP loan.

How many dollars in PPP loans have been disbursed by DreamSpring, and how many jobs have been supported by those loans?

As of June 9, 2020, DreamSpring has made 1,200 PPP loans supporting 6,755 jobs.

How can I spend my PPP loan funds?

PPP loans are intended to provide existing small businesses with eight weeks of cash flow starting from the loan origination date. At least 60% of the PPP loan is to be used to fund payroll and employee benefits costs. The remaining 40% can be spent on mortgage interest payments, rent and lease payments, and utility bills (if the obligations began before February 15, 2020).

Will my loan be forgiven?

Paycheck Protection Program loans are not automatically forgiven. You must request forgiveness from your lender. The amount of your loan that can be forgiven will be equal to the sum of the following costs incurred by your business during the 24‐week period beginning on the date of disbursement of the loan:
· Payroll costs (includes replacement of net income for sole proprietors/independent contractors)
· Interest payments on a covered mortgage obligation
· Business lease/rent payments
· Covered utility payments
· Interest accrued on the loan

How will loan forgiveness be calculated?

The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the eligible use of funds requirements of the Paycheck Protection Program. Sixty percent or more of the loan proceeds must be used for payroll expenses and the rest must be used for other eligible expenses (including rent payments, covered mortgage interest expense payments, and covered utility expenses).

Will I have to worry about a Balloon Payment?

No. The note must be fully amortizing with no balloon payment.

If I paid independent contractors with a 1099 Form, do I include them as employees on my application?

No. Any amounts that a business has paid to an independent contractor or sole proprietor should be excluded from the business’s payroll costs. However, independent contractors and sole proprietors can apply for a PPP loan themselves.

Am I expected to rehire or maintain the same level of staff?

Yes ‐ the primary purpose of this loan is to make payroll for your employees and/or replace lost income for sole proprietors. You are expected to maintain or rehire any staff members which were let go. However, there are exceptions for businesses that are unable to re-hire, must let go of employees for cause, or are restricted from operating at pre-crisis capacity to comply with health requirements related to worker or customer safety.

What type of documentation will be required for forgiveness?

To apply for loan forgiveness, you must provide the following:
· A signed Borrower Forgiveness Application, SBA Form 3508
· Documentation verifying the number of full‐time equivalent employees on payroll and pay rates for the required periods, including payroll tax filings reported to the IRS and state income, payroll, and unemployment insurance filings.
· Documentation (including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments) on covered mortgage obligations, payments on covered lease obligations, and covered utility payments.
· Any other documentation the SBA or your Lender determines is necessary to process your forgiveness application.

What’s the difference between EIDL and PPP?

The Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) are run by the Small Business Administration, and differences between the two programs are noted here:

EIDL

PPP

Who’s lending the money?Where do I I submit an application?

U.S. Small Business Administration (SBA

Financial institutions including banks, credit unions, CDFIs, online lenders, etc. The SBA guarantees the PPP loans made by these lenders.

Can I still apply?

The SBA announced last month that they are not taking new applications for businesses outside of the agricultural industry.

Yes, but only until June 30, 2020. That’s the nationwide deadline to have a PPP application approved.

Loan funds can be used for...

Almost any business purpose

Payroll, rent, utilities, mortgage interest expense