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Paycheck Protection Program

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Small Business Assistance

 

We are working quickly to be ready to assist our community's small businesses and to provide information on what is happening and how to prepare for next steps.

On January 3, the Consolidated Appropriations Act was signed into law and marks the third round of funding by Congressional leaders to support small businesses in our COVID era. The new legislation authorizes the Small Business Administration (SBA) to approve a new round of Paycheck Protection Program (PPP) loans up to a total amount of $284,500,000,000. This round of the program referred to as the PPP2 is similar to the earlier rounds however there are a few variations.

Generally, funding will be available to business with fewer than 501 employees that have not previously received a PPP loan.  For businesses that did previously receive a PPP loan, the legislation allows a ”second draw” PPP loan if the business has no more than 300 employees, has used all of the prior funds and can demonstrate with documentation, a year-over-year quarterly revenue reduction of at least 25%.

The new legislation also expanded the expenses a business could use the funds to pay and still have the loan forgiven. Likewise, the period during which the business can use the funds has expanded providing more flexibility for businesses.

The SBA published the Interim Final Rules for this round of funding Thursday, January 7. We are working to incorporate all changes to the application eligibly criteria as quickly as we can and expect to open the application portal very soon. Once open, the program will only be administered online. All correspondence related to the loan will be via email and through the email, including the application process and submission of required documents. Please see the FAQs below for more details.

At SMCU, all PPP2 loan applicants must also qualify for membership. This means at a minimum your business must be located or headquartered within San Mateo County, the City of Palo Alto, or select San Francisco zip codes. There may be other limitations including type of business, annual revenue caps, or required services that may disqualify you for membership. Please see the FAQs below for more details.
 

 Frequently Asked Questions

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 much 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.
*Certain business types may also be prohibited from joining the credit union.

 
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 March 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=
 
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 is scheduled to launch January 20, 2021.
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