Small Business Administration (SBA) Paycheck Protection Program Update on Loan Forgiveness

Paycheck Protection Program – Loan Forgiveness Information
During these unprecedented times, it has been an honor to assist our clients by offering Paycheck Protection Loans.  On Friday June 5, 2020, the President signed into law changes to the PPP loan program.  On Monday June 8, 2020, the Treasury and SBA issued the attached press release indicating the changes that will be made.  Our website will be updated after the further releases and updates indicated in the press release.
Pertinent Changes to PPP Loan Program via PPP Flexibility Act  

  • Covered period for loan forgiveness has been extended from 8 weeks to 24 weeks.  Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
  • Percentage of required money to be spent on payroll costs for the covered period has been lowered from 75 percent to 60%.   
  • Maturity of SBA approved PPP loans approved by the SBA on June 5, 2020 or after has been increased from two years to five years.
  • Safe harbor is provided 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.
  • Deferral period is extended for loan 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).
Listed below is a summary of the Loan Forgiveness calculation.   The amount of forgiveness will be equal to the amount of Qualified Expenses incurred over the Covered Period less Adjustments.  Bold terms explained below.
  • Qualified Expenses
    1. Payroll expenses
    2. Business mortgage interest payment
    3. Business rent or lease payments
    4. Business utility payments
  • Covered Period – 24 week period immediately following funding of PPP loan or 24 week period immediately following first payroll after PPP loan funding.   Borrower retains the option to use the initial 8 week covered period.  
  • Adjustments – Reductions in full-time equivalents (FTE) and Salary/Hourly wage reductions will reduce loan forgiveness. 
Loan Forgiveness Process - What to Expect
  • Once the final forgiveness process is clarified by the SBA, your Stock Yards Bank Relationship Manager will send you instructions on next steps.  They will include the following requests:
    1. Complete PPP Loan Forgiveness Application – including Schedule A and Worksheets.
    2. Provide supporting documentation.
  • Submit your completed Forgiveness application to Stock Yards Bank, including exhibit A and any supporting documentation
  • Stock Yards Bank has 60 days to review your application and submit to the SBA for approval.
  • The SBA has an additional 90 days to approve or decline the application and process your Forgiveness payment.
  • Your Forgiveness payment will be remitted to Stock Yards Bank and applied to your PPP loan.
  • VERY IMPORTANTexpect changes. The government rolled this vast program out in record time.  Many of the details of the program have been clarified after the fact.  While this is not ideal, it has been our experience to date.  Please be patient and contact your Relationship Manager if you have questions or concerns.

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