PAYCHECK PROTECTION PROGRAM
ESTABLISHED UNDER THE CARES ACT
Updated as of April 27, 2020
IMPORTANT UPDATE: At this time, we are not accepting new applications. Due to high volume, successful processing and SBA registration of applications submitted to Univest on or after April 15th is unlikely, at this time.
Please note that the submission of an application does not guaranty the receipt of a Paycheck Protection Program loan. Paycheck Protection Program loans are subject to all Small Business Administration rules and requirements. Specific inquiries can be emailed to PPPInquiries@univest.net.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), was enacted to help large and small businesses, individuals and families weather the effects of the COVID-19 pandemic. The CARES Act allocates $349 billion to the Small Business Administration (SBA) to offer loans and grants to small businesses on favorable terms. The loans are administered under a newly established Paycheck Protection Program (PPP), which is being implemented by the SBA with support from the Department of the Treasury.
The following information is intended to be a general overview and is based upon guidance issued by the SBA and the U.S. Department of the Treasury. This information may be supplemented and revised as more guidance becomes available and does not constitute legal or tax advice. PPP loan applicants should contact legal and tax/accounting professionals for questions regarding eligibility or for any legal or tax advice. Full PPP requirements can be found online here.
Highlights of PPP:
- Univest is authorized to provide PPP loans.
- There is no cost to apply.
- Interest rate is 1.0%.
- Maturity is two years.
- PPP loans may be eligible for forgiveness, subject to certain limitations.
- All loan terms are the same for everyone.
- There are no prepayment penalties.
Due to high demand, Univest is currently accepting applications only from current Univest customers that are small businesses and sole proprietorships and will begin accepting applications on April 10, 2020 for current Univest customers that are independent contractors and self-employed individuals.
What businesses are eligible to be considered for a PPP loan?
All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.
An applicant is not eligible for a PPP loan if, for example: it is engaged in any activity that is illegal under federal, state, or local law; it is a household employer (individuals who employ household employees such as nannies or housekeepers); an owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; or the applicant, or any business owned or controlled by the applicant or any of the applicant’s owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
Businesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2, except that nonprofit organizations authorized under the CARES Act are eligible. PPP loan applicants should contact legal and tax/accounting professionals for questions regarding eligibility.
How do PPP loans work?
The PPP is a SBA program. Banks authorized to make loans under the SBA’s current Business Loan Program, such as Univest, are automatically approved to make and approve PPP loans. It is important to note that banks, including Univest, do not determine eligibility. Each applicant is required to determine its eligibility for a PPP loan and make representations regarding such eligibility. All loan terms will be the same for everyone.
Loans can be for up to two months of a business’s average monthly payroll costs from the last year plus an additional 25% of that amount. However, that amount is subject to a $10 million cap. If a business is seasonal or new, different applicable time periods will be used for the calculation. Payroll costs will be capped at $100,000 annualized for each employee.
Each loan is for a term of two years and interest rates are fixed at 1.0%. This rate was specified in the recent SBA Interim Final Rule
. All payments are deferred for 6 months; however, interest will continue to accrue over this period. PPP loans can be prepaid and there are no prepayment penalties or fees. No collateral or personal guarantees are required for PPP loans. However, if the proceeds are used for fraudulent purposes, the U.S. government has indicated that it will pursue criminal charges.
Unlike other SBA programs, there is no requirement for a business to try to obtain some or all of the loan funds from other sources.
What can the funds be used for?
The proceeds of a PPP loan can be used for: payroll costs, costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; mortgage interest payments (but not mortgage prepayments or principal payments); rent payments; utility payments; interest payments on any other debt obligations that were incurred before February 15, 2020; and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.
Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); 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; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
Payroll costs do not include: compensation of an employee whose principal place of residence is outside of the United States; the compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary; Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127); and payments made by the applicant to independent contractors. Note: Independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP monthly average payroll calculation.
If an applicant received an SBA EIDL loan from January 31, 2020 16 through April 3, 2020, the applicant can apply for a PPP loan. If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan. If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance the EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. However, at least 75 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs, the amount of any EIDL refinanced will be included. For purposes of loan forgiveness, however, the borrower will have to document the proceeds used for payroll costs in order to determine the amount of forgiveness.
If a borrower uses PPP funds for unauthorized purposes, the SBA will direct the borrower to repay those amounts. If a borrower knowingly uses the funds for unauthorized purposes, the borrower will be subject to additional liability such as charges for fraud. If one of the borrower’s shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.
How is loan forgiveness determined?
The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. The borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes and employee and compensation levels are maintained. The actual amount of loan forgiveness will depend, in part, on the total amount of payroll costs, payments of interest on mortgage obligations incurred before February 15, 2020, rent payments on leases dated before February 15, 2020, and utility payments under service agreements dated before February 15, 2020, over the eight-week period following the date of the loan. However, not more than 25 percent of the loan forgiveness amount may be attributable to nonpayroll costs. Independent contractors do not count for purposes of a borrower’s loan forgiveness. The SBA is expected to issue additional guidance on loan forgiveness.
Loan amounts will not be forgiven (or the amount forgiven will be reduced) if a business does not maintain its staff and payroll.
- Number of Staff: Loan forgiveness will be reduced if a business decreases its full-time employee headcount.
- Level of Payroll: Loan forgiveness will also be reduced if a business decreases salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: A business will have until June 30, 2020 to restore its full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
In order to request loan forgiveness, a business must submit a request to the lender that is servicing the PPP loan. The request must include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. The business must certify that the documents are true and that the forgiveness amount was used to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
How does an eligible business apply for a PPP loan?
In order to apply for a PPP loan, an eligible business is required to complete the Paycheck Protection Program loan application
As part of the application, each business as well as each owner of 20% or more of the business will be required, among other things, to certify in good faith that:
- The applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC.
- Current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant.
- The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments; the applicant understands that if the funds are knowingly used for unauthorized purposes, the federal government may hold the applicant legally liable such as for charges of fraud.
- Not more than 25 percent of loan proceeds may be used for non-payroll costs.
- Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following this loan will be provided to the lender.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities and not more than 25 percent of the forgiven amount may be for non-payroll costs.
- During the period beginning on February 15, 2020 and ending on December 31, 2020, the applicant has not and will not receive another loan under this program.
- The information provided in the application and the information provided in all supporting documents and forms is true and accurate in all material respects. The applicant understands that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law by imprisonment and/or a fine.
In addition, each applicant is also required to certify that:
- The applicant has read the statements included in the Application, including the Statements Required by Law and Executive Orders, and understands them.
- The Applicant is eligible to receive a loan under the rules in effect at the time the application is submitted that have been issued by the Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
- The Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA for the Applicant’s industry.
- The applicant will comply, whenever applicable, with the civil rights and other limitations in the application.
- All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck Protection Program Rule.
- To the extent feasible, the applicant will purchase only American-made equipment and products.
- The Applicant is not engaged in any activity that is illegal under federal, state or local law.
- Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.
The completed application and required payroll documentation must be submitted to an approved lender that is available to process the application by June 30, 2020. Although the PPP is open until June 30, 2020, businesses are encouraged to apply as quickly as possible because there is a funding cap and lenders need time to process the loans.
What type of supporting documentation should accompany the application?
It is essential that each applicant gather and present adequate supporting financial documentation in a format that clearly demonstrates how the applicant calculated the average monthly payroll costs submitted. Examples of documentation that should accompany the application are as follows:
- Applicants that are using the average monthly payroll for 2019 should provide:
- 2019 Form W-3 (Transmittal of Wage and Tax Statements)
- 2019 Schedule K-1 (where applicable)
- 2019 Form W-2 for all employees
- 2019 Form 940
- For 2019, documentation of employee benefits including: costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit (only required for amounts not included in Box 1 on Form W-3)
- For 2019, documentation of state and local taxes assessed on compensation
- Applicants using the seasonal approach should provide:
- 2019 Form W-3
- 2019 Schedule K-1 (where applicable)
- 2019 Form W-2 for all employees
- 2019 Form 940
- 2019 Form 941s (Employer’s Quarterly Federal Tax Return)
- Evidence of partner/member distributions for 1/1/19-6/30/19 (where applicable)
- For 1/1/19-6/30/19, documentation of employee benefits including: costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit (only required for amounts not included in Box 2 on Form 941)
- For 1/1/19-6/30/19, documentation of state and local taxes assessed on compensation
- New businesses should provide:
- Form 941 for 1/1/20-3/31/20
- Evidence of partner/member distributions for 1/1/20-3/31/20 (where applicable)
- Payroll register for 1/1/20-2/29/20
- Documentation of employee benefits including: costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit.
- Documentation of state and local taxes assessed on compensation
Other examples of documentation include payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
How can Univest help?
Univest is an approved lender. Due to high demand, Univest is currently accepting applications only from current Univest customers that are small businesses and sole proprietorships and will begin accepting applications on April 10, 2020 for current Univest customers that are independent contractors and self-employed individuals.
It is important to understand that Univest does not determine eligibility for PPP loans. Approved lenders confirm receipt of borrower certifications contained in applications, confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020, and confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application. Each applicant is responsible to confirm its eligibility. PPP loan applicants should contact legal and tax/accounting professionals for questions regarding eligibility. Additional information
regarding the PPP can be found online.
In order to apply for a PPP loan, current Univest customers should complete the Paycheck Protection Program loan application
, which can be found online, and submit it to PPP@univest.net
, together with all supporting documentation referenced above. Univest will begin to process applications from existing customers once all required documentation has been provided.