CARES Act Paycheck Protection Program

Once the application period opens, PPP loans are available to the following:
 

1. First-time qualified borrowers, including
   
   • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
   • Sole proprietorships, independent contractors, and eligible self-employed individuals.
   • Nonprofits (including places of worship).
2. Businesses that previously received a loan as a new “second-draw” option, including businesses
   
   • With 300 or fewer employees.
   • That have used or will use the full amount of their first PPP loan in accordance with program requirements.
   • Able to show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

PPP loan funds must be spent on at least 60% of a borrower’s payroll expenses, with the remaining 40% eligible for expenses like rent, covered mortgage interest, and utilities. The following expenses may also potentially be forgivable in the current 2021 program:
 

• Operating costs, like software,cloud computing, human resources, or accounting needs.
• Property damage costs due to public disturbances occurring in 2020 and that aren’t covered by the borrower’s insurance.
• Supplier costs: any purchase order or order of goods made prior to receiving a PPP loan that’s essential to a borrower’s operations.
• Worker protection expenditures: any personal protection equipment (PPE; e.g., masks, latex gloves) or property improvements made from March 1, 2020 onward that allowed the borrower’s operation to be considered compliant with regards to health officials’ orders due to the COVID-19 pandemic.

Most PPP loan borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs. Borrowers considered a hotel or restaurant may receive up to 3.5 times their average monthly payroll costs on second draw loans.
Regardless of the type of borrower, the maximum amount of a second draw PPP loan is $2 million, first loans are still available up to the $10 million maximum from 2020.

As part of the latest round of 2021 PPP funding, a simplified forgiveness application process for loans of $150,000 or less will be available. Specifically, those who borrow $150,000 or less shall receive forgiveness if they sign and submit, to the lender, a certification no more than one page in length that includes:
 

• A description of the number of employees the borrower was able to retain because of the loan.
• The estimated total amount of the loan spent on payroll costs.
• The total amount of the loan.

Additional guidance and a new Forgiveness application is expected for these loans.

Eligibility for full PPP loan forgiveness is contingent on whether borrowers will have spent no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks.

• Changes for Schedule C filers for calculating their loan amounts. This will allow Schedule C filers to elect to use their GROSS income (instead of net income) from IRS form 1040 Schedule C. Because of this change, eligible applicants may qualify for a larger loan amount, particularly those that earned less than $100k in net income (line 31 of IRS Form 1040 Schedule C). This rule change is not retroactive and will only apply to eligible applicants that apply following the rule change. Some borrowers may be eligible to cancel a previous loan request and elect to apply under the new rules. Once a PPP loan has been funded, it is unlikely to be allowed to change the loan under SBA rules.
• Access to exclusive PPP funds set aside for sole proprietors, independent contractors, and self-employed individuals in low-to-moderate income areas. This includes home repair contractors, beauticians, small independent retailers, and others.
• Elimination of restrictions that prevent small business owners who are delinquent on their federal student loans from obtaining relief through PPP. The SBA eliminated a previous eligibility restriction to any business with at least 20 percent ownership by an individual who is currently delinquent or has defaulted within the last seven years on a federal debt, including a student loan.
• Elimination of restrictions that prevent small business owners with prior non-fraud felony convictions from obtaining relief through PPP. The SBA eliminated a previous eligibility restriction for any other non-fraud felony convictions within the previous year. A five-year lookback for fraud-related felony convictions remains in effect.
• Additional guidance for non-citizen small business owners who are lawful U.S. residents by clarifying they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief. Current PPP legislation allows lawful U.S. residents may access the program, but additional SBA guidance for ITIN holders like Green Card holders or those on Visas will be forthcoming that will clarify additional details. 

• EIDL (Economic Injury Disaster Loan)Advance Change: This eliminates the requirement that recipients of EIDL advances have their PPP forgiveness amount reduced. Borrowers that previously had PPP forgiveness reduced as a result of an EIDL advance will be made whole. 
• EIDLs (Economic Injury Disaster Loans) may be refinanced with a new first draw PPP loan.
• Tax Deductibility: The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. Previous IRS guidance stated that such expenses could not be deducted. Borrowers should consult their tax advisor(s) for specific applicability. 
• Reapplying for the maximum amount: Some businesses may be eligible to request increases to a PPP loan received in 2020. Additional eligibility rules and guidance from the SBA is available.  

More information about our PPP efforts, including application details will be added to this page as they become available. You can also reach out to our PPP team at SBACARES@UmpquaBank.com if you have questions and/or would like to learn more about how we can help.