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The Paycheck Protection Program for business owners

An important update

The United States capitol building on a sunny day. Washington D.C., U.S.A.

Important update - New federal relief legislation known as the Economic Aid Act authorizes the Small Business Administration (SBA) to approve additional Paycheck Protection Program (PPP) loans.

Based on guidance received from the Small Business Administration (SBA), we plan to begin accepting applications from clients for first and second draw PPP loans on January 19.

For this round of PPP lending, the SBA initially began accepting loan applications from community-based and small financial institutions only, and has announced that it will begin accepting applications from large lenders, including Bank of America, on January 19.

Please visit the SBA website for the latest details on PPP, including program rules and requirements. As a reminder, according to the rules of the program set forth by the U.S. Government:

  • Businesses with 500 or fewer employees that have not previously received a PPP loan may apply for a PPP loan to help with payroll, rent, utilities, healthcare costs and more.
  • Businesses that have already received a PPP loan may apply for a “second draw” PPP loan if they have used all of their first loan (or will have by the time of disbursement of the second loan), have no more than 300 employees and can demonstrate a year-over-year quarterly revenue reduction of at least 25%.

Please note: Clients who previously received a PPP loan through another lender, and who wish to apply for a second draw PPP loan, should submit their second draw application to that original lender.

At Bank of America, the PPP is administered online only. All information and correspondence related to PPP will occur online and through email, including the application process, submission of required documents and follow-up correspondence.

Simplified PPP Loan Forgiveness Process

Additionally, the new legislation includes provisions that further simplify the PPP loan forgiveness application process for loans of $150,000 or less, whereby a borrower signs and submits a simplified certification to the lender.  The legislation requires the SBA to produce a simplified forgiveness application not more than 1 page in length within 24 days from enactment into law.

We are awaiting this additional guidance from the SBA and plan to roll out our simplified PPP loan forgiveness application in February. Please note:

  • Clients who have not yet received an invitation to apply for PPP loan forgiveness will be provided an email with information on how to apply in the coming weeks. 
  • Clients who have been invited to apply for PPP loan forgiveness may proceed using one of the existing applications (SBA Form 3508, 3508EZ or 3508S). However, in light of the new federal legislation, clients with PPP loans of $150,000 or less may wish to wait to apply using the new simplified application form. We will provide an updated invitation to eligible clients when the simplified application process becomes available to them in February.
  • For clients who have already submitted an application for PPP loan forgiveness, we will continue to process that application. Clients with loans of $150,000 or less are welcome to continue with their in-process application or withdraw it and reapply using the new simplified application when it becomes available. Clients with newly eligible expenses or who wish to elect a newly allowable covered period may also withdraw their in-process application and reapply. Please note that once we submit a client’s application to the SBA, the client will be unable to withdraw it.

As a reminder, you may submit a loan forgiveness application at any time after the end of your covered period and on or before the maturity date of your loan, as long as you have an outstanding balance on your PPP loan. This guidance applies regardless of the terms in your PPP Promissory Note.

Please note that your PPP loan deferral period will end prior to your maturity date, at which point you will need to start making payments on any unforgiven amount.

For up-to-date rules for the SBA’s PPP loan forgiveness process, including your covered period, the types of costs that are eligible for forgiveness and what documentation you will need to submit as part of your application, please visit the SBA website.

These FAQs are provided for your convenience. Please be sure to understand and comply with the guidance issued by the SBA.

FREQUENTLY ASKED QUESTIONS

General

What is the Paycheck Protection Program (PPP)?
The Paycheck Protection Program is a federal relief program established by Congress and implemented by the U.S. Treasury Department and the Small Business Administration (SBA) with rules, requirements, protocols and processes that all participating banks, including Bank of America, must follow. The eligibility requirements are outlined for applicants on the U.S. Treasury and SBA websites.

For complete details, visit the SBA, U.S. Treasury Assistance for Small Business and U.S. Treasury FAQ websites.

What counts as payroll costs?
As of April 2, 2020, the SBA has stated that payroll costs (as defined in the CARES Act and Section 2.f of the Small Business Administration's Interim Final Rule Docket No. SBA-2020-0015) include:

  • Salary, wages, commissions or similar compensation (capped at $100,000 on an annualized basis for each employee)
  • Cash tips or the equivalent
  • Payment for vacation, parental, family, medical or sick leave
  • Allowance for separation or dismissal
  • Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums and retirement
  • Payment of state and local taxes assessed on compensation of employees
  • For an independent contractor or sole proprietor: wages, commissions, income or net earnings from self-employment or similar compensation, capped at $100,000 on an annualized basis
  • Payroll costs must be paid to employees whose principal place of residence is in the United States

Will Bank of America pay fees to third-party agents who have assisted clients with the preparation of PPP loan applications?
In the absence of a pre-loan approval written agreement between the agent and Bank of America, Bank of America does not pay fees or other compensation to agents who represent or assist borrowers through the Paycheck Protection Program. 

Does Bank of America disclose the names of PPP borrowers? Was my name disclosed by the SBA – or will it be in the future?
Bank of America does not publicly disclose the names or other information of clients who receive PPP loans. To learn more about disclosures by the SBA of PPP borrower information, please visit the SBA website or www.sba.gov/foia.

Applying for a new loan

When can I apply for a new PPP loan?
Based on guidance received from the SBA, we plan to begin accepting applications from clients for first and second draw PPP loans on January 19.
For the latest information, please visit the SBA website.

I have already received a PPP loan – am I eligible for another loan?
In addition to providing for new PPP loans for first-time borrowers, the legislation also allows certain existing PPP borrowers to receive a “second draw” PPP loan if they have used all of their first loan (or will have by the time of disbursement of the second loan), have no more than 300 employees and can demonstrate a year-over-year quarterly revenue reduction of at least 25%.

For details on eligibility and requirements, please visit the SBA website.

Loan forgiveness

How does new legislation change the PPP loan forgiveness process?
New legislation, signed into law on December 27, 2020, includes provisions that further simplify the PPP loan forgiveness application process for loans of $150,000 or less, whereby a borrower signs and submits a simplified certification to the lender.  The legislation requires the SBA to produce a simplified forgiveness application not more than 1 page in length within 24 days from enactment into law.

We are awaiting this additional guidance from the SBA and plan to roll out our simplified PPP loan forgiveness application in February.

When can I apply for forgiveness using the simplified, certification process (included in legislation signed into law on December 27, 2020)?
We are awaiting this additional guidance from the SBA and plan to roll out our simplified PPP loan forgiveness application in February. Please note:

  • Clients who have not yet received an invitation to apply for PPP loan forgiveness will be provided an email with information on how to apply in the coming weeks.
  • Clients who have been invited to apply for PPP loan forgiveness may proceed using one of the existing applications (SBA Form 3508, 3508EZ or 3508S). However, in light of the new federal legislation, clients with PPP loans of $150,000 or less may wish to wait to apply using the new simplified application form. We will provide an updated invitation to eligible clients when the simplified application process becomes available to them in February.
  • For clients who have already submitted an application for PPP loan forgiveness, we will continue to process that application. Clients with loans of $150,000 or less are welcome to continue with their in-process application or withdraw it and reapply using the new simplified application when it becomes available. Clients with newly eligible expenses or who wish to elect a newly allowable covered period may also withdraw their in-process application and reapply. Please note that once we submit a client’s application to the SBA, the client will be unable to withdraw it.

As a reminder, you may submit a loan forgiveness application at any time after the end of your covered period and on or before the maturity date of your loan, as long as you have an outstanding balance on your PPP loan. This guidance applies regardless of the terms in your PPP Promissory Note.

Please note that your PPP loan deferral period will end prior to your maturity date, at which point you will need to start making payments on any unforgiven amount.

Should I apply now for PPP loan forgiveness or wait until the simplified, certification process (included in legislation signed into law on December 27, 2020) is available?
If you have received an email with an invitation to apply for forgiveness, you may use the link in that email to apply now using one of the existing applications (SBA Form 3508, 3508EZ or 3508S), or wait to apply using the simplified application process (if your loan is $150,000 or less).

Please note that we are awaiting additional guidance from the SBA related to the new legislation and plan to launch our simplified forgiveness application for loans of $150,000 or less in February.

How does the Economic Aid Act, signed into law on December 27, 2020, change the process for Economic Injury Disaster Loan (EIDL) Advance deductions?
The Economic Aid Act repealed the deduction of EIDL Advances from loan forgiveness amounts. According to guidance from the SBA:

  • The SBA will no longer deduct EIDL Advances from forgiveness amounts remitted to lenders, effective on December 29, 2020.
  • For those loans where SBA has already deducted an EIDL Advance from a forgiveness remittance submitted to a lender, the SBA will automatically remit a reconciliation payment to that lender for the previously-deducted EIDL Advance amount, plus interest through the remittance date.
  • Bank of America will apply any reconciliation funds received from the SBA due to a previously-deducted EIDL Advance to the balance of the impacted PPP loan and communicate updated balance and payment information to the client.
  • To the extent you have repaid your outstanding PPP, which included a previously-deducted EIDL Advance amount, Bank of America will refund you this amount upon receipt of reconciliation funds received from the SBA.

How did the Paycheck Protection Program Flexibility Act impact the loan forgiveness process?
The Paycheck Protection Program Flexibility Act, signed into law on June 5, 2020 contained the following changes to the program:

  • You now have a 24-week Covered Period, the period in which you must spend the PPP loan proceeds for full loan forgiveness, starting on the date the funds were disbursed. If your PPP loan was funded prior to June 5, 2020, you still have the option to use the original 8-week Covered Period.
  • Your deferral period, during which payments on your loan will be deferred, will commence on the date on which your PPP loan was funded and end on (i) the date on which the amount of forgiveness as determined under section 1106 of the CARES Act is remitted to the Bank (or the date the SBA notifies us that no forgiveness is allowed) or (ii) the date which is ten (10) months after the last day of your Covered Period (as determined in accordance with Section 1106 of the CARES Act), if you have not applied for forgiveness by such date.
  • You must use at least 60% of funds for eligible payroll costs to qualify for full loan forgiveness, down from 75%
  • You can use up to 40% of funds for eligible nonpayroll costs, up from 25%

You can find up-to-date information on the rules of the program on the SBA website.

When can I apply for loan forgiveness?
We are working to deliver the best possible experience for you during this important time. We will email you with specific instructions on how and when you can apply when the loan forgiveness application portal becomes available to you. 

As a reminder, based on the latest updates from the SBA, you now have more time to gather your documents and prepare your application. The timeframe for applying for loan forgiveness in the promissory note no longer applies. 

For additional assistance with PPP loan forgiveness documentation, view our documentation guide.

If I elect to use the SBA's new loan forgiveness application (Form 3508S), will I be required to submit documentation?

The latest guidance from the SBA requires borrowers using Form 3508S - as well as Form 3508 and Form 3508 EZ - to submit documentation in connection with their loan forgiveness application. You will not be eligible to receive loan forgiveness without supporting documentation.

For detailed information on the application, including Covered Periods, the type of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.

For additional assistance with PPP loan forgiveness documentation, view our documentation guide.

How do I know if I am eligible to apply for loan forgiveness? (Small Business Online Banking)
You can sign in with your Small Business Online Banking username and password, click on your Paycheck Protection Program Loan and select “Check PPP Status".

We will email you with specific instructions on how and when you can apply when the PPP loan forgiveness application portal becomes available to you. The email can be found in your Alerts History within Small Business Online Banking titled “Our Paycheck Protection Program loan forgiveness application is now available".

How can I apply for PPP loan forgiveness if I cannot locate or deleted the email with instructions? (Small Business Online Banking)
The email can be found in your Alerts History within Small Business Online Banking titled “Our Paycheck Protection Program loan forgiveness application is now available".

I cannot find the email with details on how to apply for loan forgiveness or how to check the status of my PPP loan forgiveness application. Where can I find those details? (CashPro Only)
When you sign into CashPro and navigate to the PPP status page, you will see your Actions required and Forgiveness status. If you are eligible at this time to apply for loan forgiveness, you will see a link under Actions required titled “Apply for or decline forgiveness." Once your application is submitted, the Forgiveness status will indicate where you are in the loan forgiveness process. You may also contact your Relationship Manager or Banker for assistance.

How long do I have to apply for loan forgiveness?
Regardless of the terms in your PPP Promissory Note, as long as you have an outstanding balance on your PPP loan, you may submit a loan forgiveness application any time after the end of your Covered Period, but on or before the maturity date of your loan.

We will notify you by email of any changes to your loan forgiveness application window. 

Please note that your PPP loan deferral period will end prior to your maturity date, at which point you will need to start making payments on any unforgiven amount.

For additional assistance with PPP loan forgiveness documentation, view our documentation guide.

I paid off my PPP loan – am I still eligible for forgiveness on that loan?
No. According to the rules of the PPP program established by the SBA, a borrower who paid their PPP loan in full would not be eligible to apply for forgiveness. For additional information, please visit the SBA website

When does my PPP loan deferral period end? / When do I need to start making payments on my PPP loan?
The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) extended the deferral period for borrower payments of principal and interest on all PPP loans to the earlier of (a) the date that the SBA remits the forgiven amount to the lender or notifies the lender that no forgiveness is allowed;  and (b) the date that is 10 months after the date that is the earlier of (i) 24 weeks after the end of the borrower’s “covered period” or (ii) December 31, 2020, if the borrower does not apply for forgiveness by such date. 

Can I apply for forgiveness prior to the end of my elected Covered Period?
No. The current SBA application for PPP loan forgiveness contains certain representations and documentation requirements that relate to the end of the Covered Period. As a result, you will only be able to apply for loan forgiveness through Bank of America once your Covered Period has ended.

Which PPP loan forgiveness application should I use?
In an effort to make it easier for some businesses to apply for PPP loan forgiveness, the SBA has published two additional PPP Loan Forgiveness Applications - Form 3508EZ and Form 3508S, for borrowers who meet certain requirements. To determine if you are able to use either of those applications, you should review the Checklist for Using SBA Form 3508EZ and the Checklist for Using SBA Form 3508S on the SBA’s website.

Borrowers who do not meet the requirements for using Form 3508EZ or Form 3508S will apply using the updated PPP Loan Forgiveness Application Form 3508.

For additional assistance with PPP loan forgiveness documentation, view our documentation guide.

Can I submit a paper application for PPP loan forgiveness?
Applications for PPP loan forgiveness at Bank of America must be submitted digitally through our online PPP loan forgiveness application portal. We will not accept paper loan forgiveness applications.

How can I prepare to apply for loan forgiveness?
Once you determine which SBA Loan Forgiveness Application Form you will use, we recommend that, prior to applying online through Bank of America for PPP loan forgiveness, you carefully review and fill out the applicable form, and gather the required documentation specified in the instructions: 

Who determines the amount of loan forgiveness?

The U.S. Treasury and Small Business Administration (SBA) are responsible for the rules of the program, which determine the amount of loan forgiveness you may receive. This can include full, partial or no forgiveness.

We encourage you to visit the U.S. Treasury and SBA websites for the most up-to-date program rules and guidance.

How is the amount of owner compensation that is eligible for loan forgiveness determined?  What if I am an owner of multiple businesses with multiple PPP loans?
The applicable Interim Final Rules (IFRs) and FAQs provide that the amount of compensation of owners who work at their business that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-week Covered Period. The amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at the lesser of $20,833 per individual or the 2.5-month equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. For borrowers that received a PPP loan before June 5, 2020 and elect to use an eight-week Covered Period, this cap is $15,385 per individual or the 8 week equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. If their total compensation across businesses that receive a PPP loan exceeds the cap, owners can choose how to allocate the capped amount across different businesses

Is interest on unsecured credit eligible for loan forgiveness?
As of August 4, 2020, in Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, the SBA stated that payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.

Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP owner-employee compensation rule when determining the amount of their compensation that is eligible for loan forgiveness?
In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA clarified that, for C- and S-Corp borrowers, owners with less than a 5% ownership stake are exempt from the owner-compensation cap. 

Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, in the context of home-based businesses, household expenses, eligible for forgiveness?
No. In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA has stated that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses.  The IFR provides four examples:

1) If a borrower rents a building for $10,000/month and subleases a portion of the building for $2,500/month, only $7,500 of the rent is an eligible non-payroll expense.

2) If a borrower has a mortgage on a building and leases 25% of the fair market value of the building to other businesses, only 75% of the mortgage expense is eligible.

3) If a borrower operates out of a shared rental, it must prorate rent and utilities as it did on its 2019 tax filings (or, for new businesses, as it will on its expected 2020 tax filings).

4) If a borrower works out of their home, only the share of covered expenses that were deductible on their 2019 tax filings are eligible for forgiveness (or, for new businesses, expected 2020 tax filings).

Can I apply for forgiveness prior to the end of my elected Covered Period?
No. The current SBA application for PPP loan forgiveness contains certain representations and documentation requirements that relate to the end of the Covered Period. As a result, you will only be able to apply for loan forgiveness through Bank of America once your Covered Period has ended.

What utility payments are eligible for forgiveness?
Business payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020.

Are rent payments made to related parties eligible for forgiveness?
In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA has stated rent payments to related parties are eligible for forgiveness so long as 1) “the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business” and 2) “the lease and mortgage were entered into prior to February 15, 2020.”  Borrowers must provide mortgage interest documentation to substantiate these payments.  And where the payor requests forgiveness for amounts paid to a related party, the related party cannot also request forgiveness for that same amount.  Additionally, “[w]hile rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness.”

I am planning to (i) sell all or part of my interest in my company, or (ii) merge my company with another company or (iii) sell some or all of the assets of my company to a third party, before my PPP loan is forgiven or paid in full.   Do I need to notify the Bank or the SBA?
The SBA published a Procedural Notice on Changes Of Ownership on October 2nd, which is available on the SBA website.   This notice requires, in most situations, that the PPP lender provide confirmation to the SBA of your satisfaction of the requirements set forth in the Procedural Notice.  Please contact your financial advisor as soon as possible, but at least 10 business days before the proposed date of the sale or merger, so that we can provide assistance in setting up an escrow account if needed and answer other questions you may have as you go through this process.

Where should I go if I have questions?
For detailed information on the application, covered periods, the types of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.

For additional assistance with PPP loan forgiveness documentation, view our documentation guide.

For questions related to PPP, please contact your Bank Representative. 

Bank of America is committed to supporting you and all of our clients during this challenging period. 

Important Note: The Small Business Administration and the Department of Treasury continue to provide additional guidance concerning the Paycheck Protection Program. Thus, Bank of America makes no representation that information contained herein is up-to-date or complete. Before submitting a request for loan forgiveness, borrowers may wish to visit the SBA, U.S. Treasury Assistance for Small Businesses, and U.S. Treasury FAQ websites for the latest information and guidance related to the Paycheck Protection Program.

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