Presidential Paycheck Protection Program (PPP) Loans

Overview

The PPP Program. Under the CARES Act, which became law on March 27, 2020 in response to the Coronavirus crisis, the Small Business Administration (SBA) is now offering 100% guaranteed, fully forgivable, 1% interest rate 2-year loans through approved lenders like Presidential Bank, under the new Paycheck Protection Program (PPP).
 

Qualified Borrowers. Any small business with 500 or fewer employees will qualify. Moreover, companies in the restaurant and hospitality industries qualify so long as they have no more than 500 employees at any one location, and in addition certain non-profits will qualify. This government program is only temporary, and the deadline to apply for these loans is June 30, 2020.
 

No credit qualification will be required to determine borrower eligibility. No collateral is needed, and no personal guarantees will be required when the borrower is a separate business entity.
 

Amount of Loan. Generally speaking the amount that can be borrowed is 2.5 times the borrower’s average monthly payroll, including tips, commissions, paid leave, and personnel-related expenses like health care costs and employer retirement contributions, that were incurred during calendar year 2019. A different averaging period can be used if the average for all of 2019 is inappropriate. A business owner’s net income from the business can also be included as part of payroll. Any income earned by an employee or owner in excess of $100,000 annualized is excluded from the calculation.
 

Permitted Expenditures. The borrower must agree to spend at least 75% of the loan proceeds on payroll and personnel related expense. Additional amounts from the loan proceeds, not to exceed 25% of the total, can be used for rent, mortgage loan interest and utility expenses. If the borrower uses the loan only in the foregoing manner, then the entire amount of the loan will be forgiven. To the extent that a borrower uses loan proceeds in a way that does not meet these requirements, then the portion improperly used will not be forgiven. Presidential Bank will have delegated authority to make loan forgiveness decisions, based upon documentation provided by the borrower. Therefore, it will be important for borrowers to maintain complete records of their qualifying expenditures.
 

Click here to access the Presidential Paycheck Protection Pre-Application Inquiry Form