Paycheck Protection Program

YES. It is encouraged. If you apply for this second round with your original lender, you may not have to provide as much information about your business or your basis for drawing the first round. You are allowed however, to apply at any participating lender for this second round but will have to provide information about your first loan and how you used the funds in addition to documentation for the second-round funding.

Please note, second draw rules require that the business must have used (or will use by the second draw funding), all of their first loan, have no more than 300 employees and can demonstrate a year-over-year quarterly revenue reduction of at least 25%.

You do not need to have a business membership to apply, but it will be required before the loan is funded. Opening up the business membership will be part of the loan application process.

 

• Your business must be located or headquartered in San Mateo County, City of Palo Alto, or the following San Francisco zip codes: 94110, 94112, 94116, 94122, 94124, 94132, or 94134
• Your annual revenue should not exceed $10,000,000.
• Your monthly business activities should not require large cash deposits.

The Paycheck Protection Program (PPP) is a federal relief program established by the CARES Act and implemented by the U.S. Treasury Department and the Small Business Administration (SBA) with rules, requirements, protocols and processes that all participating lenders must follow. The first round of funding was fully administered within 14 days of the opening of the program.

A second round of funding was approved with the passing of the PPP & Healthcare Enhancement Act in early summer 2020. That round of funding expired on August 8, 2020. This third round of funding was authorized with the passing of the Consolidated Appropriations Act signed into law on December 27, 2020 (the “PPP2”). The program is authorized through May 31, 2021 or until all funds have been disbursed.

The program provides that as long as you use at least 60% of the funds for covered payroll costs, the entire loan amount may be forgiven.

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 the first draw if this is a                      second draw); 

          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
 
SBA Overview of First Draw Loans:
https://home.treasury.gov/system/files/136/Top-line-Overview-of-First-Draw-PPP.pdf
 
SBA Overview of Second Draw Loans:
https://home.treasury.gov/system/files/136/Top-line-Overview-of-Second-Draw-PPP.pdf
 

Eligible small entities, that together with their affiliates (if applicable), have 500 or fewer employees—including nonprofits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—can apply.

• Salary, wages, commissions or similar compensation (capped at $100,000 on an annualized basis for each employee).
• Cash tips or the equivalent
• 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
• For an independent contractor or sole proprietor: wages, commissions, income or net earnings from self-employment or similar compensation, capped at $100,000 on an annualized basis
• Payroll costs paid to employees whose principal place of residence is in the United States

If you are a first-time applicant, you can apply for a loan of up to $10 million or 2.5 times your average payroll costs for the previous year, whichever is lower.  If you are in the hospitality industry (NAICS codes starting with 72), you may be eligible for up  to 3.5 times your monthly payroll.
You can find your NAICS code on the following site and will need this number to apply. https://www.naics.com/code-search/?naicstrms=
 

Self-employed with no employees: The following methodology should be used to calculate the maximum amount that can be borrowed if you are self-employed and have no employees, and your principal place of residence is in the United States, including if you are an independent contractor or operate a sole proprietorship (but not if you are a partner in a partnership):

• Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount.3 If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
• Step 2: Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
• Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.

• Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

Your 2019 IRS Form 1040 Schedule C must be provided to substantiate the applied-for PPP loan amount. You must also provide a 2019 IRS Form 1099-MISC detailing nonemployee compensation received (box 7), IRS Form 1099-K, invoice, bank statement, or book of record establishing you were self-employed in 2019 and a 2020 invoice, bank statement, or book of record establishing you were in operation on February 15, 2020.

Self-employed with employees: The following methodology should be used to calculate the maximum amount that can be borrowed if you are self-employed with employees, including if you are an independent contractor or operate a sole proprietorship (but not if you are a partner in a partnership):
 

• Step 1: Compute your 2019 payroll costs by adding the following:
  • 2019 IRS Form 1040 Schedule C line 31 net profit amount: 4
    • if this amount is over $100,000, reduce it to $100,000,
    • if this amount is less than zero, set this amount at zero;
  • 2019 gross wages and tips paid to your employees whose principal place of residence is in the United States, up to $100,000 per employee, which can be computed using:
    • 2019 IRS Form 941 Taxable Medicare wages & tips (line 5ccolumn 1) from each quarter,
    • Plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips, and
    • Minus (i) any amount paid to any individual employee in excess of $100,000, and (ii) any amounts paid to any employee whose principal place of residence is outside the United States; o 2019 employer contributions for employee group health, life, disability, vision, and dental insurance (the portion of IRS Form 1040 Schedule C line 14 attributable to those contributions);
  • 2019 employer contributions to employee retirement plans (IRS Form 1040 Schedule C line 19); and
  • 2019 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
• Step 2: Calculate the average monthly payroll costs amount (divide the amount from Step 1 by 12).
• Step 3: Multiply the average monthly payroll costs amount from Step 2 by 2.5.
• Step 4: Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

Your 2019 IRS Form 1040 Schedule C, IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements), along with documentation of any retirement or group health, life, disability, vision, and dental contributions, must be provided to substantiate the applied-for PPP loan amount. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation and had employees on that date.

Partnership: The following methodology should be used to calculate the maximum amount that can be borrowed for partnerships (partners’ self-employment income should be included on the partnership’s PPP loan application; individual partners may not apply for separate PPP loans):
 

• Step 1: Compute 2019 payroll costs by adding the following:
  • 2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of individual U.S.-based general partners that are subject to self-employment tax, multiplied by 0.9235,5 up to $100,000 per partner: 6
    • Compute the net earnings from self-employment of individual U.S.-based general partner that are subject to self-employment tax from box 14a of IRS Form 1065 Schedule K-1 and subtract (i) any section 179 expense deduction claimed in box 12; (ii) any unreimbursed partnership expenses claimed; and (iii) any depletion claimed on oil and gas properties;
      • if this amount is over $100,000, reduce it to $100,000;
      • if this amount is less than zero, set this amount at zero;
  • 2019 gross wages and tips paid to employees whose principal place of residence is in the United States (if any), up to $100,000 per employee, which can be computed using:
    • 2019 IRS Form 941 Taxable Medicare wages & tips (line 5ccolumn 1) from each quarter,
    • Plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips, and
    • Minus any amounts paid to any individual employee in excess of $100,000 and any amounts paid to any employee whose principal place of residence is outside the United States;
  • 2019 employer contributions for employee (but not partner) group health, life, disability, vision, and dental insurance, if any (portion of IRS Form 1065 line 19 attributable to those contributions);
  • 2019 employer contributions to employee (but not partner) retirement plans, if any (IRS Form 1065 line 18); and
  • 2019 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms), if any.
• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).
• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.
• Step 4: Add any outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

The partnership’s 2019 IRS Form 1065 (including K-1s) must be provided to substantiate the applied-for First Draw PPP Loan amount. If the partnership has employees, other relevant supporting documentation, including the 2019 IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements) along with records of any retirement or group health, life, disability, vision, and dental insurance contributions must also be provided to substantiate the First Draw PPP Loan amount. If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date. If the partnership has no employees, an invoice, bank statement, or book of record establishing the partnership was in operation on February 15, 2020 must instead be provided.

For other business entities, please see SBA Guidance here.
 

• This information may vary based on your business entity, but generally, please gather any of the following that apply:
• Corporate Formation/Entity Documents
• Corporate By-Laws, Articles of Incorporation or Partnership Agreements as applicable
• Business License
• Borrowing Resolutions or Authorizations
• Tax returns
• Personal Identification such as a Driver’s License for the authorized signer of business (front and back) who is applying
• 2019 W-3 Statement along with supporting documentation itemizing each employee’s annual pay including benefits for sole proprietorship
• Eligibility of the loan/loan amount
• Supporting documentation for 2019 and/or one of the following three periods.
  • If your business is not seasonal: trailing 12 months.
  • If your business is seasonal: 12 weeks following February 15, 2019, or
  • March 1, 2019- June 30, 2019
• Payroll Reports for the relevant pay period. Reports should include gross wages including PTO (vacation, sick and other PTO). If required, a supporting letter from a PEO and any payroll processor records
• Number of employees (if relevant)
• Documentation showing Health Insurance Premiums Paid by the Company Under a Group Health Plan including Owners of the Company for the immediately preceding 12 months prior to the date of SBA PPP loan application 
• Payroll Tax Reports filed with the IRS (Including Forms 940, 941, 944, State Income and Unemployment Tax Filing Reports)
• Documentation of all retirement plan funding by the employer
• Income and expenses from a sole proprietorship or Form 1099-MISC for contractors 
• List of Employees salary, wages, commissions and tips in 2019 or 2020, who earn above $100,000, if any.
•  
  For borrowers that do not have any such documentation, other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

• Any 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) Addendums

 

If you received an SBA Economic Injury Disaster Loan you are not automatically disqualified. If your loan was disbursed between January 31, 2020 and April 3, 2020 you will need to provide details and submit with your application. EIDL Advances made during this time frame are no longer deducted from your maximum loan amount.

Our loan application portal opened January 20, 2021. To apply click here.


 

The recent legislation expands the forgiveness provisions and further simplifies the PPP loan forgiveness application process for loans of $150,000 or less, whereby a borrower signs and submits a simplified certification to SMCU. The legislation requires the SBA to produce a simplified forgiveness application not more than one page in length within 24 days from enactment into law.
We will provide additional guidance on the forgiveness application process in the coming months. Please check back beginning in June 2021 for information on the required documents and the forgiveness process with SMCU.

• The latest legislation provides you flexibility. You may use as few as 8 weeks or as much as 24 weeks to use the funds as provided – with at least 60% toward payroll costs – in order to obtain full forgiveness of the entire loan.
   

• The U.S. Treasury and Small Business Administration (SBA) are responsible for the rules of the program, which determine the amount of loan forgiveness you may receive. This can include full, partial or no forgiveness. We encourage you to visit the U.S. Treasury and SBA websites for the most up-to-date program rules and guidance. We will also update these FAQ’s as information becomes available.
   

• As of August 4, 2020, in Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, the SBA stated, payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.

• Business payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020.

• Other Small Business Administration relief programs: The SBA is providing small business owners with access to special financing options
• Community Development Financial Institutions (CDFIs): You may also turn to CDFIs, which are small and typically not-for-profit providers of loans. To get started, find a CDFI near you.
• SBA 7(a) lenders: The SBA can help match you to local lending partners

FEDERAL LINKS:

• Paycheck Protection Program FAQs for Small Business
• Small Business Administration (SBA): Coronavirus (COVID-19): Small Business Guidance & Loan Resources
• Small Business Administration (SBA): COVID-19 Economic Injury Disaster Loan Application
• Center for Economic and Policy Research (CEPR): Federal Stimulus FAQ

STATE LINKS:

• Governor’s Office of Business and Economic Development (GO-Biz): Coronavirus 2019
• America’s SBDC California: COVID-19 – The Latest News & Resources for Your Business
• Coronavirus Aid, Relief, and Economic Security Act (Cal OES)

SAN MATEO COUNTY ECONOMIC DEVELOPMENT ASSOCIATION (SAMCEDA):

• Business Resources
• Financial Relief
• Find Your Local Chambers