First National Bank

Small Business Financial Relief

Paycheck Protection Program (PPP) Loan Q&A

 

While the final rules and regulations are not our yet here is what we know so far:

           

Who can get a loan?

Businesses, including self-employed and independent contractors, Nonprofits (501(c)(3)), veterans’ organizations (501(c)(19)) and tribal business concerns, with less than 500 employees.

What is the maximum loan amount?

Up to $10 million but not more than 2.5 times average monthly payroll, generally measured over the 12 months prior to the loan being made.

How much will be forgiven?

The principle balance of the loan will be reduced by an amount equal to all expenses for payroll, utilities, and rent or mortgage interest, during the 8-week period after the loan is granted.  Any remaining principle balance will be amortized over a period of up to 10 years.  However, the first payment will be deferred for six months.

How much is the interest rate?

Remaining principle balance after loan forgiveness will be charged interest not to exceed 4% but will vary depending on the length of term (up to 10 years).

What documentation must be provided by the borrower?

The guidelines have not yet been published, but it is clear they will need to establish an average monthly payroll over the last twelve months.  This information will need to be carefully detailed, including payments for insurance and retirement benefits, among other items.  The borrower will also need to be able to separately identify compensation paid to individuals that exceeds $100,000.  The remaining documentation required, if any, has not yet been established by the Administration.  However, if your potential borrowers want to begin gathering documents now, in addition to payroll information, they will want to ensure that their financial records allow them to quickly identify payments made for payroll and benefits, rent, mortgage interest, and utilities. Prior tax returns may also be beneficial.  Again, documenting payroll in detail will be crucial.

What limitations typical of some SBA loans are waived for this program?

There is no requirement for collateral or personal guarantees.  In addition, borrowers will not be required to show that they cannot obtain financing elsewhere.

Does a business have to be negatively impacted by the COVID-19 virus in order to get a loan?

The business will be required to attest that the uncertainty related to the COVID-19 virus has made the loan request necessary to support the ongoing operations of the business.

 

If you are interested in the program go to www.fnbdc.com and sign up to receive an application or give us a call at 229-246-3131 and ask for Bert Hines.

 

EXAMPLE: 

A small business with fewer than 500 employees and an average monthly payroll of $150,000 over the last twelve months applies for a PPP loan with its bank. After attesting that the COVID-19 virus has impacted its business operations and submitting other required documentation, the business receives a loan of $375,000. Over the next 8 weeks it is determined that the business has incurred $350,000 in eligible payroll, rent and utilities expenses.  The principal balance of the loan is reduced to $25,000 and amortized over a period of up to 10 years at an interest rate not to exceed 4%.  The program prohibits SBA from charging fees to the lender and the borrower.