The Economic Aid Act recently passed Congress allocating an additional funds to support the SBA Paycheck Protection Program (PPP). The approved $284 billion will be made available to both first time PPP borrowers as well as qualifying existing PPP borrowers in need of a second draw.
To promote access for smaller lenders and their customers, SBA will initially only accept First Draw PPPLoan applications from participating community financial institutions (CFIs), which include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs), and Microloan Intermediaries.
Paycheck Protection Program lending will reopen to all participating lenders shortly thereafter.
PPP First Draw Loans
KGEFCU’s Community Development Financial Institution status allows us to begin the application process on Monday, January 11th. You may begin your application after reading through the information and requirements.
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. First Draw PPP Loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.
- PPP loans have an interest rate of 1%.
- Loans issued prior to June 5 have a maturity of two years. Loans issued after June 5 have a maturity of five years.
- Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
Who can qualify?
The following entities affected by Coronavirus (COVID-19) may be eligible:
- Sole proprietors, independent contractors, and self-employed persons
- Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
- 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:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- 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
How to apply?
First draw borrowers can start the application process now by using the First Draw Application Link.
PPP Second Draw Loans
KGEFCU is now accepting applications for PPP Second Draw Loans through our online portal.
To apply, members login to the portal and click the green “Apply for PPP Second Draw Loan” button in the top right corner.
PPP Second Draw Loan borrowers who have already taken out a PPP loan may be eligible for a second draw if they meet the following criteria:
- 300 or fewer employees
- Sustained a 25% revenue loss in any quarter in 2020 compared to 2019 and
- Have used or will use the full amount of the first PPP loan.
If you have questions please reach out to us at firstname.lastname@example.org and someone will assist you.
Reapplying and loan increases
Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may:
- Reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or
- Under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible
Second Draw Loan Details
The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan. Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
Loan Forgiveness Terms
Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan;
The loan proceeds are spent on payroll costs and other eligible expenses; and
At least 60 percent of the proceeds are spent on payroll costs.
Maximum Loan Amount
For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5 times the average monthly 2019 or 2020 payroll costs up to $2 million.
How to apply for a Second Draw PPP Loan?
You can apply through our online portal as soon as it is available. Check back here for updates.
Loan Forgiveness Application Steps
We are currently accepting forgiveness applications from our PPP borrowers.
PLEASE NOTE: The following steps reflect the forgiveness application process based on the current legislation. We are continuing to monitor the status of proposed changes that may alter the process, documentation requirements, and application forms. The following information below is for your reference only.
Access KGEFCU’s Loan Portal below
Validate or update the existing application information
Complete all required fields
Complete the online workbook or manual data entry for the forgiveness calculation
Upload supporting documentation
Submit your completed forgiveness application
More General PPP Information
What is the Paycheck Protection Program?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed into law on March 27, 2020. It allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides loans to small businesses who need funds to maintain their payroll during this emergency. Importantly, these loans may be forgiven by SBA if borrowers comply with the SBA rules for forgiveness.
What is the maximum loan amount?
- The maximum loan amount is determined based on criteria set forth by the SBA. Generally, the maximum loan your business qualifies for will be based on your average monthly payroll over the prior 12 months and multiplying that number by 2.5.
- For sole proprietors, independent contractors, and self-employed individuals, the sum of any compensation that is a wage, commission, income, or similar compensation. (Not to exceed $100,000).
What is the interest rate?
The interest rate for the loan is set by the SBA and is currently 1.00%.
What are the terms?
- Loan allows for deferred payments up to 6 months
- Repaid over a 2 year term
- Portions of the loan principal amount may be forgiven by the SBA based on the rules and requirements set by the SBA
- No collateral or personal guarantees are required
- Terms and conditions are subject to change
Is my credit affected?
Credit will not be pulled and your credit will not be adversely affected if you are denied.
Does the PPP offer loan forgiveness?
- Borrowers may be eligible to have their loan forgiven based on rules established by the SBA. Should you intend to seek full or partial loan forgiveness, you and your legal advisors should consult with SBA to confirm you are in compliance with any loan forgiveness requirements.