SBA Resources and Information
CONTINUOUSLY UPDATED PPP FAQS: CLICK HERE
PPP Forgiveness Information
The SBA and US Dept of Treasury released the Paycheck Protection Program (PPP) Loan Forgiveness Application & Instructions on May 15, 2020 which may be accessed via the following link. Please review the detailed instructions and calculation requirements as you prepare to apply for forgiveness. PPP loan borrowers will be required to complete the application and accompanying schedules, worksheets and certifications then submit to the Bank along with supporting documentation. The SBA has also indicated that it will release additional guidance about this form soon and South Shore Bank will also provide information about its forgiveness application process in the near future. Please continue to work closely with your trusted advisors to ensure the accuracy of the information and certifications that you submit and maximize your forgiveness.
PPP Good-Faith Certification
46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.
PPP Forgiveness Information
South Shore Bank is proud to have been able to help you obtain a Small Business Administration (SBA) Paycheck Protection Program (PPP) loan during the COVID-19 pandemic. The Treasury and SBA continue to release updated guidance regarding the program via its FAQ list, the latest of which can be found at SBA PPP FAQs (May 6, 2020). Additional guidance regarding the rules for loan forgiveness is expected any day and we will post that on our website when available. In the meantime, it is important that you keep the following in mind:
- At time of application, borrowers are required to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” FAQ #31, which was published on April 23, 2020, notes that borrowers must make this certification in good faith, taking into account other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. FAQ #31 further notes that any borrower that applied for or received a PPP loan prior to the issuance of this guidance but determines that they do have access to sufficient liquidity and repays the loan in full by May 7, 2020 will be deemed by the SBA to have made the required certification in good faith. Also see FAQ #37 published on April 29, 2020.
- In order to ensure that PPP loans are limited to eligible borrowers and per FAQ #39 published on May 3, 2020, the SBA announced it 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. In such audits, borrowers will likely need to show how they used the PPP loan funds and explain the facts and circumstances they relied upon to back up their good faith certification of program eligibility.
- While further clarity is needed regarding forgiveness rules, it is clear that all PPP loan borrowers should maintain proper and thorough documentation to substantiate use of PPP funds and support their certifications made in connection with the loan. Maintain clear copies of all payroll records, invoices, mortgage or rent payments, and utility bills.
- Ensure that PPP funds are used for purposes authorized under the SBA PPP guidelines for the 8-week period following the disbursement of the loan. It is important to know that if a PPP loan is used for unauthorized purposes, the loan can be converted to a recourse liability and forgiveness provisions voided.
- Work closely with your tax professional to ensure you understand the program rules and maximize the forgivable amount. Please note that a minimum of 75% of the loan proceeds should be used on payroll costs, and up to a maximum of 25% on the other authorized costs.
- South Shore Bank’s plan is to have you submit a Forgiveness Request Package after the 8-week period. We are in the process of developing standardized documents for this next phase of the program and will communicate requirements with you as soon as available.
Please remember, you are responsible for the accuracy of the information and certifications submitted with your application and used to determine your loan amount and eligibility. The fact that South Shore Bank processed and originated your loan does not shift your responsibility or ensure your compliance with PPP rules. For additional information and guidance, review the SBA Interim Final Rule and the frequently updated SBA PPP FAQs at www.sba.gov.
Should you need additional information, please contact your Loan Officer or our Customer Information Center at (781) 682-3715 or CIC at SouthShoreBank dot com.