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Your Guide to the Paycheck Protection Program

posted Jasmyne Green 4/6/2020 in Business

Many small business owners are seeking guidance as they apply for Paycheck Protection Program backed by the Small Business Administration (SBA) to help retain workers.

PLEASE NOTE: The U.S. Small Business Administration the Paycheck Protection Program has depleted all the funds it allocated for American small businesses. Due to this recent change, Lincoln Savings Bank is no longer accepting any new applications for PPP loans.

To help you through the application process, we've covered all of the important points you need to know about this program below.


What is the Paycheck Protection Program?
When can I apply?
Who can apply?
Where can I apply?
What documents should I be preparing for the application?
Do I need to first look for other funds before applying to this program?

What can I use this loan for?
What counts as payroll costs?
How large can the loan be?
How much of my loan will be forgiven?
What is my interest rate? 
When do I need to start paying interest on my loan?
When is my loan due?
Can I pay my loan earlier than 2 years?
Do I need to pledge any collateral for these loans?
Is the Paycheck Protection Program first-come, first-served?


What is the Paycheck Protection Program? 

The Paycheck Protection Program is a government-backed lending program provided through the SBA, which authorizes up to $349 billion in potentially forgivable loans to small businesses during the COVID-19 crisis.  

The loan amounts are able to be forgiven if: 

  • 75 percent or more of the loan proceeds are used to cover payroll costs, and 25 percent or less are used toward mortgage interest, rent, and utility costs over the 8-week period following the distribution of funds.  and 
  • Full-time employees and average compensation levels are maintained throughout the company. 
  • Payroll costs are capped at $100,000 for each employee on an annual basis, due to likely high subscription of this program. 
  • Payments for these loans will be deferred for 6 months. 

When can I apply? 

Starting April 3, 2020, applications are scheduled to open for small businesses and sole proprietorships. Starting April 10, 2020, applications are scheduled to open independent contractors and self-employed individuals can apply for and receive loans to cover their payroll. 

Who can apply? 

  • Businesses with 500 employees or less, including nonprofits, veterans' organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors.  
  • Businesses in certain industries that have more than 500 employees can be eligible if they meet applicable SBA employee-based size standards for those industries (click HERE for additional information). 
  • For this program, the SBA's affiliation standards are waived for small businesses (1) in the hotel and food services industries (click HERE for NAICS code 72 to confirm); or (2) that are franchises in the SBA's Franchise Directory (click HERE to check); or (3) that receive financial assistance from small 

Where can I apply? 

You can apply through any existing SBA lender, such as  Lincoln Savings Bank, or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders may be available to facilitate these loans once the institutions are approved and enrolled within the program. For a full list of SBA lenders, click here

What documents should I be preparing for the application? 

Prospective applicants should begin gathering the following information to be adequately prepared.

  • Completed the Application
  • Articles of Incorporation/Organization of each borrowing entity 
  • Bylaws/Operating Agreement of each borrowing entity 
  • Copies of all owners' Driver's Licenses 
  • Payroll Expense Verification documents to include: 
  • IRS Form 940 and 941 
  • Payroll Summary Report with a corresponding bank statement. 
  • If a Payroll Summary Report is not available, Employee Pay Stubs as of February 15, 2020 (or corresponding period) with a corresponding bank statement, and, 
  • Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.) 
  • 1099s (for independent contractors) 
  • Certification that all employees live within the United States. If any do not, provide a detailed list with corresponding salaries of all employees outside the United States 
  • Profit and Loss Statement for the past twelve months (as of the date of application) for all applicants, with month-by-month detailed reviews.  
  • The business's most recent Mortgage Statement or Rent Statement (Lease) 
  • The business's most recent utility bills (Electric, Gas, Telephone, Internet, Water) 

Do I need to first look for other funds before applying to this program? 
No. We are waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources (i.e., we are waiving the Credit Elsewhere requirement). 

What can I use this loan for? 
You should use the proceeds from this loan on your: 

  • 75 percent or more of the loan should be used for payroll costs, including benefits. 
  • Interest on mortgage obligations, incurred before February 15, 2020 
  • Rent, under lease agreements in force before February 15, 2020 
  • Utilities, for which service began before February 15, 2020. 

What counts as payroll costs? 
Payroll costs include: 

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee.) 
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefits. 
  • State and local taxes assessed on compensation. 
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee. 

How large can my loan be? 
Loans can be for up to two and a half months of your average monthly payroll costs from the last year. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee. 

How much of my loan will be forgiven? 
Borrowers will owe money when their loan is due if they use the loan funds outside of the direct guidelines given by the SBA. This means 75 percent or more of the loan should be allocated for payroll costs, and 25 percent or less may be used toward mortgage interest, rent, and utility payments over the 8 weeks following the distribution of funds. If any of the funds are used for expenses outside these guides, those portions of the loan will not be eligible for loan forgiveness. Borrowers will also owe money if they do not maintain your staff and payroll. 

  • Number of Staff: The loan's forgiveness will be reduced if the borrower decreases their average full-time employees.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. 
  • Re-Hiring: You have until June 30, 2020 to restore your average full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. 

What is my interest rate? 
1% fixed rate. 

When do I need to start paying interest on my loan? 
All payments are deferred for 6 months; however, interest will continue to accrue over this period. 

When is my loan due? 
24 months from the date of the loan approval.  

Can I pay my loan earlier than 2 years? 
Yes. There are no prepayment penalties or fees. 

Do I need to pledge any collateral for these loans? 
No. No collateral is required. 

Is the Paycheck Protection Program "first-come, first-served?"
Yes. 

We understand this is a stressful time and businesses are facing unprecedented financial hardships. We want to assure our customers and our communities we are here to help. Lincoln Savings Bank is a registered SBA lender and we are prepared to work in partnership with the federal government to get these funds to Iowa small businesses in need as quickly as possible.  

At this time, Lincoln Savings Bank is putting our current customers first and working to help our community businesses prosper. If you are an existing Lincoln Savings Bank customer, please contact your commercial lender or complete this form

While we would love to help everyone as soon as we are able, we realize that it may be a later date than you may prefer. If you are NOT a current LSB customer, please sign-up to be notified when we are accepting non-customer applications. 

Lincoln Savings Bank 
Member FDIC 

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