Business (fewer than 500 employees) and Nonprofit Support

 

Paycheck Protection Program Flexibility Act

Our community, like so many others across the globe is in need, and the need isn’t going to go away tomorrow, or next month or even next year. It’s our mission as a community bank to build, encourage and support both our local small businesses and our neighbors, whom we know by name. A recent win for our community, was the enactment of the Paycheck Protection Program Flexibility Act. This will take an unbelievable amount of pressure off our local small business owners, and allow them to see light at the end of this very long tunnel. To find out more visit, our PPP Flexibility Act webpage.

 

STAR Paycheck Protection Program Loan Information

Thank you for putting your trust in STAR to obtain your PPP loan. We are here to help you with the forgiveness portion; however, we are not quite ready to accept forgiveness applications as we are awaiting additional SBA guidance. We know that obtaining forgiveness is extremely important and that you have many questions. Rest assured that STAR is working hard to make sure that your forgiveness process is as streamlined and seamless as possible.

STAR will send you an email as soon as you can submit your application for forgiveness under the SBA PPP loan program, along with instructions to get you started. In the meantime, we have included some information to help you prepare. This information will be updated regularly to incorporate the most recent SBA guidance as it is made available. If you have questions that are not addressed in the FAQs below, please contact your banker or email PPPLoanForgiveness@starfinancial.com.

 
 

Forms and Instructions

Download a PPP Loan Forgiveness application and instructions for completing the form:
 
 
 
Note as of June 8, 2020

The passage of the Paycheck Protection Flexibility Act of 2020 changed the existing program. The modifications implemented the following changes:

  • Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
  • Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID-19.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
  • Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
  • Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
 
FAQs:
The following FAQs are being provided for informational purposes only and are not intended to provide and should not be relied on as tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors in addressing any of the matters discussed herein. Please note, the SBA guidance is subject to any changes issued in later guidance by the SBA and the Department of Treasury.
 
What is my SBA PPP Loan Number?
Your SBA Loan Number and Lender Loan Number are the same and can be found at the top left hand corner on page 2 of your Promissory Note.
 
What is my disbursement date?
The date your loan funds were deposited to your account.
 
What documents will STAR require me to submit with my PPP Loan Forgiveness Application:
  • PPP Loan Forgiveness Calculation Form (starts on page 3 of the application)
  • PPP Schedule A (page 6 of the application)
 
Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
 
  1. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees. 
  2. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
         i. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
         ii. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. 
  3. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).
 
FTE: Documentation showing (at the election of the Borrower):
 
  1. the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
  2. the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
  3. in the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve- week period between May 1, 2019 and September 15, 2019.
The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11. Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specific time period.
 
Nonpayroll: Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.
 
  1. Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  2. Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through
    one month after the end of the Covered Period verifying eligible payments.
  3. Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
 

What is my Covered Period?

Covered Period: The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or (2) if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an eight-week (56-day) Covered Period. For example, if the Borrower is using a 24-week Covered Period and received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, October 4. In no event may the Covered Period extend beyond December 31, 2020.

 

What is the Alternative Payroll Covered Period?

For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 24-week (168-day) period (or for loans received before June 5, 2020 at the election of the borrower, the eight-week (56-day) period) that begins on the first day of their first pay period following their PPP Loan Disbursement Date. For example, if the Borrower is using a 24-week Alternative Payroll Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, October 10. Borrowers that elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference in this application to “the Covered Period or the Alternative Payroll Covered Period.” However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in this application to “the Covered Period” only. In no event may the Alternative Payroll Covered Period extend beyond December 31, 2020.

 

How much of my loan could be forgiven?

Forgiveness is based on your use of the loan proceeds over the eight-week or twenty-four week Covered Period or the corresponding Alternative Payroll Covered Period following your loan disbursement. A minimum of 60% of your loan needs to be for payroll costs, the remaining 40% should be used for other forgivable purposes such as rent, utilities and mortgage interest.

 

What is the deadline to apply for loan forgiveness?

You may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if you have used all of the loan proceeds for which you are requesting forgiveness.

 

When will I know how much of my loan is forgiven?

You should receive a response from us within 60 days after a complete application for loan forgiveness and the supporting documentation is received. The SBA has an additional 90 days to review our request.

 

Where do I submit my request for loan forgiveness?

If you received your PPP loan through STAR, the Forgiveness Application and supporting documents need to be submitted through us. We are setting up our process and will let you know when we are ready to begin accepting applications and provide a link.

 

Is loan forgiveness automatic?

No. You must submit the application for Loan Forgiveness along with all supporting documentation.

 

What if only part of my loan is forgiven?

You will need to pay the remaining principal and interest over the remainder of the 24 or 60 month term of your loan, depending on your loan date. Principal and interest payments will start 10 months after the end of your loan forgiveness covered period.  We will notify you of the exact date.

 

Does interest accrue during the forgiveness application period?

Yes, interest is accruing at 1% from the date of disbursement.

 

What if I don’t qualify for loan forgiveness?

You will need to repay the full principal and interest balance over the remainder of the 24 or 60 month term of your loan.

 

May I include lease payments I make on business personal property such as business vehicles or equipment?

Yes, the current version of the Loan Forgiveness Application states that these can be included if the agreement was in force before February 15, 2020.

 

May I include the payment I make on a loan for my business personal property or mortgage?

No, you can only include the interest payments made during the covered period for obligations incurred before February 15, 2020 (but not any prepayment or payment of principal).

 

What are considered utilities?

Business utility payments for electricity, gas, water, transportation, telephone or internet access for which service began prior to February 15, 2020.

 

May I use loan proceeds only for payroll costs paid during the covered period or may I also use them for payroll costs incurred?

Generally, payroll costs paid or incurred during the covered period are eligible for forgiveness. Payroll costs are considered paid on the day the checks are distributed or you originate the ACH credit transaction. Payroll costs incurred during your last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date, otherwise they must be paid during the covered period to be eligible for forgiveness.

 

When is payroll considered incurred?

On the day the employee’s pay is earned (i.e., on the day the employee worked). For employees that are not performing work but are on the borrower’s payroll, payroll costs are incurred based on the schedule established (typically the date the employee would have performed work).

 

How do I calculate my payroll costs if my loan funds were received in the middle of a pay period?

Your Covered Period begins on the date the loan funds are disbursed. The SBA has established an “Alternative Payroll Covered Period” for employers who use a biweekly (or more frequent) payroll schedule. The Alternative Payroll Covered Period allows you to start your covered period for payroll on the first day of their first pay period following your PPP loan disbursement date. The Loan Forgiveness Application instructions give the following example: if the Borrower is using a 24-week Alternative Payroll Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered

Period is Saturday, October 10.  Borrowers that elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference in this application to “the Covered Period or the Alternative Payroll Covered Period.”  However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in this application to “the Covered Period” only.  In no event may the Alternative Payroll Covered Period extend beyond December 31, 2020. 

 

Is my covered period for nonpayroll costs the same as for my payroll if I use the Alternative Payroll Covered Period?

No. Your nonpayroll costs Covered Period is either the eight-week or twenty-four week period that starts on the date your PPP loan was disbursed. 

 

Are bonuses and hazard pay paid to employees during the covered period eligible for loan forgiveness? What if my employees are furloughed but I am still paying them?

Yes, according to the Interim Final Rule on Loan Forgiveness, “the CARES Act defines the term “payroll costs” broadly to include compensation in the form of salary, wages, commission, or similar compensation. If a borrower pays furloughed employees their salary, wages, or commissions during the covered period, those payments are eligible for forgiveness as long as they do not exceed an annual salary of $100,000, as prorated for the covered period.

I own the business, may I pay myself a bonus?

No, there is a cap for owner-employees that is tied to 2019 compensation.


Are there caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?

Yes.  For borrowers that received a PPP loan before June 5, 2020 and elect to use an eight-week covered period, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at eight weeks’ worth (8/52) of 2019 compensation (i.e., approximately 15.38 percent of 2019 compensation) or $15,385 per individual, whichever is less, in total across all businesses. 

For all other borrowers, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at 2.5 months’ worth (2.5/12) of 2019 compensation (i.e., approximately 20.83 percent of 2019 compensation) or $20,833 per individual, whichever is less, in total across all businesses.  

In particular, C-corporation owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement and health insurance contributions made on their behalf.  S-corporation owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement contributions made on their behalf, but employer health insurance contributions made on their behalf cannot be separately added because those payments are already included in their employee cash compensation. 

Schedule C or F filers are capped by the amount of their owner compensation replacement, calculated based on 2019 net profit.

General partners are capped by the amount of their 2019 net earnings from self-employment (reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied by 0.9235.  For self-employed individuals, including Schedule C or F filers and general partners, retirement and health insurance contributions are included in their net self-employment income and therefore cannot be separately added to their payroll calculation.

 
 Forgiveness is not automatic and is subject to all terms and criteria contained in the SBA interim final rule(s) and program guidance.

 

 

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