SBA Paycheck Protection Program (PPP) FAQs

Regardless of where you are in the Paycheck Protection Program (PPP) application process, we have answers to some of the frequently asked questions that we’ve been hearing from business owners.

STAGE 1
Application
STAGE 2
Submitted an
Application
STAGE 3
Preparing to submit
for loan forgiveness

STAGE 1 - APPLICATION

If you haven’t applied yet, but you’re thinking about it, here are answers to the questions you might be asking:

Q: Is my business eligible to apply for a PPP loan?

A: You should review carefully the required certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” You must make this certification in good faith, taking into account your current business activity and ability to access other sources of liquidity sufficient to support your ongoing operations in a manner that is not significantly detrimental to the business. Companies should be prepared to demonstrate to the SBA, upon request, the basis for its certification.

The following entities affected by Coronavirus (COVID-19) may be eligible:
1. Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
2. Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
a. 500 employees, or
b. That meets the SBA industry size standard if more than 500
3. Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
4. Sole proprietors, independent contractors, and self-employed persons

As a sole proprietor, you are able to apply for either the PPP or unemployment, but not both. As a business owner with employees, the decision between applying for a PPP loan or laying off your employees so they can collect unemployment benefits becomes more complicated. In either case, we encourage you to work with a financial professional, such as your accountant, to determine if PPP is the best option for your business.

Q: What can I use the PPP loan for?
A: You should use the proceeds from this loan on your:
1. Payroll costs, including:
a. Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
b. Employee benefits including costs for vacation, parental, family, medical, or sick leave; an allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
c. State and local taxes assessed on compensation; and
d. 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
2. Interest on mortgage obligations, incurred before February 15, 2020;
3. Rent, under lease agreements in force before February 15, 2020; and
4. Utilities, for which service began before February 15, 2020.

Q: Can I apply for a PPP loan at more than one bank?
A: Your PPP loan can only be approved for funding through one financial institution. If Village Bank is not the first bank that you have applied with, confirm your application status at the first institution before submitting a second application. If you have difficulty getting confirmation, we suggest you withdraw your application before applying with Village Bank.

Q: How do I apply for a PPP loan with Village Bank?
A: Village Bank wants to help as much of our community as possible, but we cannot guarantee we will be able to help everyone. To be added to our queue for the second round of SBA funding, your next step is to submit your application as well as supporting documentation listed below as soon as possible.

Document Preparation List:
Please refer to the following document preparation list below to assist you as you gather the necessary information to process your application:
1. Wholly completed, initialed, and signed Payment Protection Program (PPP) Application & Checklist form
2. Articles of Incorporation/Organization of each borrowing entity (confirming date of establishment of the entity with the Sec. of State)
3. By-Laws/Operating Agreement of each borrowing entity
4. Payroll Expense verification documents to include:
a. IRS Form 941 and 944
b. Payroll Summary Report
c. If a Payroll Summary Report is not available, Employee Pay Stubs as of February 15, 2020 (or corresponding period) with corresponding bank statements, and,
d. Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
5. Employer-paid Health/Dental/Vision-related cost breakdown detail
6. Employer contribution detail relating to individual retirement accounts
7. NAICS industry code detail for each borrowing entity
8. If you are an Independent Contractor, 1099s and 2019 Schedule Cs are needed
9. Copy of Driver’s Licenses or other state-issued photo I.D.
10. Completed CARES Estimate Tool workbook (above-listed information to support and confirm calculation detail)

For additional guidance with regards to your loan amount calculation, please refer to the PPP Borrower Information Fact Sheet for more answers to commonly asked questions about PPP, and the Borrower’s Forgiveness Guide for Paycheck Protection Program Loans for information regarding SBA PPP loan forgiveness.

Completed applications and corresponding documents can be emailed directly to our loan processing team at SBA@villagebankonline.com.

Q: How do I calculate the loan amount that my business should be requesting?
A: Leverage this FAQ document for calculating maximum loan amounts by business type and work with a financial professional like your accountant to make sure your payroll numbers are correct.

Q: Who should I be working with to complete the application properly?
A: Work with your accountant or bookkeeper to calculate accurate payroll amounts and gather the required documentation. It's important that you are looking ahead and turning in the most complete application possible. Also, make sure to include everyone with at least 20 percent ownership in the business because they are required to sign and initial everything, even if they’re not involved with the business.

 

STAGE 2– SUBMITTED APPLICATION

If you’ve submitted an application with Village Bank, here are answers to questions about what happens next:

Q: How long should I wait to hear from my banker after submitting all necessary documentation?
A: We understand you are anxious to find out when you will receive your funds as we understand how important this loan is to your business. We are doing our best to respond promptly after receiving documents, but it takes time to review your application and process it.

Q: How do I know when my loan has been successfully processed?
A: You will be notified by the banker that you are working with via email when your loan has been successfully processed and approved into the SBA system. You will also receive via email your loan information (SBA-generated loan number) and documentation to sign via DocuSign from Village Bank. Once you receive this confirmation from your banker, your funding is secured.

Q: After processing is complete, what do I need to do?
A: All funds will be disbursed into a Village Bank deposit account, so a Village Bank cash management expert will reach out to you to open this account if you do not have an existing deposit account with Village Bank. When you receive your loan information and documentation to sign, please ensure all information is accurate. We are doing our best to ensure there are no mistakes, but with the high volume of loans we are processing, mistakes may happen. Be diligent about ensuring the correctness.

Q: Will my PPP loan be sold?
A: It is not Village Bank’s intention to sell our PPP loans at this time.

 

STAGE 3 – PREPARING TO SUBMIT FOR LOAN FORGIVENESS

If you’ve been approved for PPP loan funding, here are answers to questions about funding and loan forgiveness:

Q: When will I receive the funds in my deposit account?
A: On average it can take 10 days to fund your loan. We are working as quickly as possible to fund loans but have a tremendous number of loans to process. Please be patient and diligent about checking your account periodically. If 2 weeks have gone by and your loan has not been funded, reach out to your banker to check-in.

Q: Can my PPP loan be forgiven?
A: You should review carefully the required certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” You must make this certification in good faith, taking into account your current business activity and ability to access other sources of liquidity sufficient to support your ongoing operations in a manner that is not significantly detrimental to the business. Companies should be prepared to demonstrate to the SBA, upon request, the basis for its certification.

The loan will be eligible to apply for forgiveness if the funds are used during the 8-week period after loan disbursement for payroll costs, interest (not principal) on mortgages, rent, and utilities that were in existence prior to February 15, 2020. At least 75% of the forgiven amount must have been used for payroll.

Q: How do I apply for loan forgiveness?
A: You will apply to your lender for loan forgiveness. The application for forgiveness must include documentation of the loan proceeds being used for the purposes included in the calculation of the amount eligible for forgiveness, including state and federal payroll tax reports, unemployment insurance filings, lease agreements, mortgage statements, utility statements, receipts, bank transcripts, canceled checks or other evidence showing how funds were used. Lenders must make a determination on the application within 60 days of your application.

On May 15, 2020, the SBA released the application for PPP loan forgiveness, which you can review here. This is a preliminary application and subject to change by the SBA. Businesses are not eligible to apply for forgiveness until the eight-week period from loan funding is complete. This means if your loan was funded on April 10 you will not be eligible until June 6, 2020. If your loan was funded on May 11 you will not be eligible until July 6. Village Bank will not begin accepting forgiveness applications until June 6. An example of your SBA loan number/lender number is shown here:

PPP loan snip forgiveness

We expect to receive additional guidance from the SBA on loan forgiveness. We will send a follow-up email with instructions for applying for forgiveness prior to when we begin taking applications on June 6. 

Q: How could the forgiveness amount be reduced?
A: The full 8-week forgiveness will be granted to businesses that retain their employees and the compensation paid to those employees. Loan forgiveness amounts will be reduced if the employer has on average fewer employees during the 8-week period after receiving the loan than during the time periods of either February 15, 2019, to June 30, 2019, or January 1, 2020, to February 29, 2020, (as chosen by the employer), or if the employer reduces the pay of any employee by more than 25% compared to the last calendar quarter. To encourage employers to rehire workers laid off due to the COVID-19 crisis, the PPP provides that if a business rehires previously laid-off workers or eliminates any reductions in salaries prior to June 30, 2020, it will not be penalized for having a reduced payroll at the time of the loan.

Q: What happens to loan amounts that are not forgiven?
A: Any portion of the loan that is not forgiven will have a 2-year term with deferred P&I for the first 6 months, amortizing over the remaining 18 months at 1%.

Please note: this guidance may change or be updated due to additional analysis or further guidance from the SBA. For complete guidance on the SBA PPP Loan Program visit sba.gov or treasury.govPlease check back on this page for updated information.

 

Contact our SBA Team

For more information about SBA resources, please visit Village Bank’s SBA Financing page.

 

 

 

 

 

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