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Paycheck Protection Program Round 3 Instructions

Thank you for your interest in the Paycheck Protection Program. Please read the below for the latest information on the Program and what to expect.


Definitions

PPP: Paycheck Protection Program

First Draw Loan: These are first-time PPP loans. If you did not receive a PPP loan in 2020, and would like to apply for your first PPP loan now, you would be applying for a First Draw loan. 

Second Draw Loan: If you have already received a PPP loan from a previous round but are requesting a second loan or a re-advance on the first loan.

PPP Deadline: PPP Loan applications may be approved by the SBA through March 31, 2021. The SBA has up to 5 days to approve applications.

Covered Period: The Covered Period is the timeframe where a Borrower must spend the funds received from the PPP Loan. The Borrower may select a Covered Period of 8-weeks up to 24-weeks. The Covered Period begins the date of loan disbursement and concludes 8-weeks up to 24-weeks (the length is up to the Borrower).


Loan Details

PPP Loans have an interest rate of 1%. Loans issued prior to June 5, 2020 have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years. Loan payments will be deferred for Borrowers who apply for loan Forgiveness until the 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.


Eligibility

Who is eligible to apply for the next round of PPP loans?

PPP loans will be available to first-time qualified Borrowers and to businesses that previously received a PPP loan, if certain requirements are met. 

Your business is not eligible if:

  • If you received or will receive a grant under the Shuttered Venue Operator Grant program
  • The business was created in or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or has significant operations in the People’s Republic of China or the Special Administrative Region of Hong Kong owns or holds, directly or indirectly, not less than 20% of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership
  • Retains, as a member of the board of directors of the business, a person who is a resident of the People’s Republic of China


Are Borrowers eligible to receive both a new PPP loan and a Second Draw loan under the new legislation?

A: The program is broken out so that you can apply for a:

  • New PPP Loan: For Borrowers who did not originally receive a PPP loan in 2020, or
  • Second Draw PPP Loan: For Borrowers who received a PPP Loan in 2020 and are eligible to receive a second round of PPP funds

Some qualified Borrowers may be able to draw eligible unused funds on their first PPP Loan, and then also obtain a Second Draw Loan.


Calculating a Loan

How do I calculate my requested loan amount?

You can receive a loan amount of up to 2.5 times your average monthly payroll costs in the year prior to the loan or the calendar year. This is the same as the previous PPP round.

For First Draw loans, the maximum loan amount allowed is $10 million. 

For Second Draw loans, the maximum loan amount allowed is now $2 million. In addition, PPP Borrowers with NAICS codes starting with 72 (lodging and food service) can receive up to 3.5 times their average monthly payroll costs up to $2 million.


For all PPP Loans, seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020. 

Seasonal businesses are categorized as businesses that operate for no more than 7 months or 75% of revenue occurs in 6 months or less.

Please note: Individual contractors do not count as employees for purposes of PPP loans as they have the ability to apply for a PPP loan of their own.


What qualifies as a seasonal business?

A: Seasonal businesses, for purposes of PPP Loan application, are those that do not operate for more than 7 months in any calendar year, or those businesses with gross receipts for any 6 months in the prior year less than or equal to 33.33% of the gross receipts for the other 6 months of that year.


First Draw Loans

First Draw Requirements 
  • You have a Rockland Trust Business Checking account number, or Personal Checking Account if you are a Sole Proprietor (so that we are able to deposit your PPP funds should your PPP application be approved)
  • Businesses that employ no more than 500 employees per location, unless the Borrower meets the SBA size standard for their industry
  • Sole proprietors, independent contractors, and eligible self-employed individuals
  • Not-for-profits, including churches and 501(c)(6) membership organizations
  • Lodging and food service operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location
  • The business was in operation on February 15, 2020
  • Did not receive a PPP loan in 2020
  • The loan request is $10 million or less (or $20 million or less for a corporate group)
  • Borrowers who did not take all of the eligible first round PPP funds and may apply to have the remaining funds disbursed

First Draw Documentation Requirements
  • Documentation verifying the number of full-time equivalent (FTE) employees on the applicant’s payroll
    • 2019 or 2020 calendar year, third party payroll cost report listing all employees and the average number of hours worked per week; or
    • 2019 or 2020 Form 941 tax filings
    • For seasonal employers, payroll may be determined by any consecutive 12-week period between February 15, 2019 and February 15, 2020
  • Documentation that supports the amount of payroll costs incurred for either 2019 or 2020, depending on which year is used for the loan amount calculation Payroll costs include employee compensation, benefits, owner compensation, retirement, and state payroll taxes
    • 2019 or 2020 W3 and W2 for all employees; or
    • 2019 or 2020 calendar year third party payroll cost report listing all employees and total wages; or
    • All four quarters of 2019 payroll/employment tax filing (Forms 941/940)
    • Self-employed individuals and independent contractors must also provide their 2019 or 2020 Schedule C

Second Draw Loans

Second Draw Eligibility 


How do I prove that I have used the full amount of my first loan?

A: No documentation is required, however, the borrower must certify that the first loan has been used or will have been used. The SBA may request support of this certification in the case of a PPP loan audit.


Second Draw Requirements
  • You have a Rockland Trust Business Checking account number, or Personal Checking Account if you are a Sole Proprietor (so that we are able to deposit your PPP funds should your PPP application be approved)
  • Current economic uncertainty makes the PPP loan necessary to support ongoing operations
  • The loan requested is $2 million or less (or $4 million or less for a corporate group)
  • The business has 300 or fewer employees per location, unless the SBA size standard is met for the industry
  • The business used or will use the full amount of their first PPP loan
  • The business can show a 25% gross revenue decline in any quarter in 2020 compared with the same quarter in 2019, or a 25% gross revenue decline for all of 2020 compared to 2019 (ex. Q2 ’20 vs Q2 ’19)
  • The business was in operation on February 15, 2020

501(c)(6) organizations, such as chambers of commerce, are also eligible, provided the business does not have more than 300 employees and do not receive more than 15% of the business’ receipts from lobbying activities.

  

Second Draw Documentation Requirements
  • Documentation verifying the number of full-time equivalent (FTE) employees on the Borrower’s payroll
    • 2019 or 2020 calendar year, third party payroll cost report listing all employees and the average number of hours worked per week; or
    • 2019 or 2020 Form 941 tax filings
    • For seasonal employers, payroll may be determined by any consecutive 12-week period between February 15, 2019 and February 15, 2020
  • Documentation that supports the amount of payroll costs incurred for either 2019 or 2020, depending on which year is used for the loan amount calculation. Payroll costs include employee compensation, benefits, owner compensation, retirement, and state payroll taxes.
    • 2019 or 2020 W3 and W2 for all employees; or
    • 2019 or 2020 calendar year, third party payroll cost report listing all employees and total wages; or
    • All four quarters of 2019 payroll/employment tax filings (Forms 941/940)
    • Self-employed individuals and independent contractors must also provide their 2019 or 2020 Schedule C
 
If you received a First Draw loan in 2020 from another financial institution, and would like to apply for your Second Draw at Rockland Trust, you will need your SBA Authorization number from your First Draw loan when applying with Rockland Trust for your Second Draw. 


Can I use the same 2019 payroll data for the Second Draw Loan or do I need to use 2020 payroll data?

A: Applicants can use the 2019 or the 2020 payroll data to calculate the loan amount.

 

Calculating the 25% Reduction

For a Second Draw Loan how do I calculate gross receipts or the 25% revenue reduction requirement?

A: Gross receipts includes all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances

  • Generally, receipts are considered “total income” and excludes net capital gains or losses
  • Gross receipts do not include the following:
    • Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees)
    • Proceeds from transactions between a concern and its domestic or foreign affiliates
    • Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker


What documentation would I need to calculate the 25% reduction in revenue for the periods referenced in the application?

  • Tax returns, or
    • 1120/1120S: Total income plus cost of goods sold
    • Schedule C: Gross income plus cost of goods sold
    • 1065: Total income plus cost of goods sold
    • Schedule F: Gross income
  • Internal Financial statements, or
  • Bank statements, or
  • Other detailed internal revenue reports
  • Not-for-profits: Gross receipts within the meaning of section 6033 of the Internal Revenue Code of 1986


What documentation will I be required to provide to substantiate the 25% gross receipts reduction?
  • If you are providing quarterly financial statements (showing one quarter in 2019 compared to the same quarter in 2020), you must sign and date the first page of the statements, and initial all other pages. 
  • If you are providing quarterly or monthly bank statements, you must note which deposits listed on the bank statement reflect gross receipts.  
  • If you are referencing annual revenue decline (as opposed to one quarter in 2019 compared to the same quarter in 2020), then your annual returns are required.
  • However:
    • If you have not yet filed a tax return with the IRS for 2020, you must complete the return forms, calculate the relevant gross receipts value, and sign and date the return
    • If you have filed your tax returns, you must submit signed copies of those returns”


If I received a PPP Loan in 2020, do I include those funds when calculating Gross Receipts if I apply for a Second Draw?

A: 2020 PPP Loan funds should not be included in Gross Receipts, regardless of whether your 2020 PPP Loan was Forgiven or not.

 

If my gross receipts decreased more than 25% in Q2 of 2020 but were restored by Q4 of 2020, am I eligible for a Second Draw PPP loan?

A: Yes, the legislation signed by Congress states that to be eligible for a Second Draw or new PPP Loan, the Borrower must have experienced a decrease in gross receipts in either quarter 1, quarter 2, quarter 3 or quarter 4 of 2020 relative to the same quarter of 2019. If you compare any quarter of 2020 against the same quarter of 2019 and have a 25% decrease or more, you are eligible.

 

If I sold assets and have a capital gain, can I exclude this gain from the 25% revenue reduction calculation?

A: Yes. The instructions on the form indicated capital gains are excluded from Gross Receipts.


Forgiveness

What are the requirements for potential Forgiveness of this next round of PPP funds?

To be eligible for full loan Forgiveness, PPP Borrowers will have to spend no less than 60% of the funds on eligible payroll costs during the Covered Period. The Borrower may select a Covered Period of 8-weeks up to 24-weeks.

The new legislation includes new cost categories eligible for Forgiveness. The following categories are eligible for Forgiveness:

Payroll:

  • Employee compensation
  • Owner compensation
  • Borrower cost for employee benefits
  • Group benefits costs

Non-payroll:

  • Mortgage interest
  • Rent
  • Utilities
  • Operating costs such as software, cloud computing services or accounting needs
  • Costs related to property damage due to public disturbances not covered by insurance
  • Supplier costs that are essential at the time of purchase to the recipient’s current operations
  • Worker protection costs (PPE, etc.)

Keep in mind that the Borrower still must spend at least 60% of the funds on payroll.


If I used a subcontractor due to an outbreak at my office, can I use what I paid out as a payroll expense?

A: Payments to contactors are not considered part of eligible payroll costs. Only payments to employees.


When does the Covered Period begin?

A: The Borrower may select a Covered Period of 8-weeks up to 24-weeks. The Covered Period begins the date of loan disbursement and concludes 8-weeks up to 24-weeks (the length between that timeframe is up to the Borrower).

 

What do I need to know if I received an EIDL Advance?

A: The new legislation repeals section 1110 (e)(6) of the CARES Act, which requires PPP Borrowers to deduct the amount of their EIDL Advance from their PPP Forgiveness amount. Rules will be issued to ensure Borrowers are made whole if they already received Forgiveness and their EIDL was deducted from their Forgiveness amount. There will no longer be a residual PPP Loan balance for the EIDL Advance


When will Borrowers be able to request Forgiveness for loan under $150,000 using the new streamlined process?

A: On January 19, 2021, the SBA released their new Forgiveness application form for loans of $150,000 or less, called the 3508S. We are currently working with our portal team to implement this into our system.


Will Borrowers who received two PPP Loans (First and Second Draw) under $150,000, but together the loans are greater than $150,000, be eligible to use the new streamlined Forgiveness process?

A: Our interpretation of the new legislation is that the First and Second Draw Loans are separate Loans so the Forgiveness will be issued separately as well.

So, if a Borrower received First and Second Draw Loans under $150,000, they would be eligible for the new streamlined Forgiveness process for both Loans once the SBA releases that application. However, the SBA has yet to release their guidance regarding this new form.


Has PPP Forgiveness been impacted?

The new legislation creates a simplified Forgiveness application for loans of $150,000 or less. Any Borrower with a loan of $150,000 or less is eligible to use this form once released, even if they received a loan in 2020, as long as Forgiveness has not already been issued by the SBA.

Borrowers applying for Forgiveness using the new streamlined application will be required to sign and submit a one-page certification to Rockland Trust, which includes:

  • A description of the number of employees the Borrower was able to retain because of the covered loan
  • The estimated total amount of the loan spent on payroll costs
  • The total loan amount

The Borrower must also attest that they accurately provided the required certification and complied with program requirements.

Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans after Forgiveness has been issued.

 

Taxes

Has the taxability of the PPP loan changed?

Yes, the new COVID-19 relief law specifies that expenses covered by the PPP loan will be tax deductible.


Timeline

Below is the review timeline of the PPP Loan process. It’s important to keep in mind that:

  • Unlike the first rounds of PPP, when you submit your PPP Loan application, we will not receive an approval from the SBA instantly, rather in hours or days. We will notify you of the decision of your loan application.
  • Your Covered Period is any timeframe between 8 and 24-weeks starting on the date of disbursement.
  • When you submit for Forgiveness, the bank has 60 days to make a decision.
  • When the application is submitted to the SBA, they have 90 days to make a decision.




Please stay tuned for more information regarding the latest Paycheck Protection Program round. We encourage you to visit our PPP webpage often. If you have further questions, please reach out to your relationship manager or call our Customer Information Center at 508.732.3826.

Thank you for working with Rockland Trust. Your relationship is truly important to us.

Important Note:

As a Borrower under the Paycheck Protection Program, it is your sole legal responsibility to comply with all laws and regulations applicable to Borrowers under the Small Business Administration Paycheck Protection Program (SBA PPP).

Rockland Trust urges SBA PPP Borrowers to closely review the latest SBA PPP law, regulations and guidelines (Guidelines). The Guidelines can be found on the Small Business Administration and the Department of Treasury websites: www.SBA.gov and www.Treasury.gov. Rockland Trust cautions you that the Guidelines are evolving.  The Small Business Administration periodically updates the Guidelines. Some updates modify prior Guidelines, other updates provide further clarification. 

Rockland Trust does not provide legal, tax, or accounting advice. Individual facts and circumstances vary from Borrower to Borrower which will impact any answers regarding any interpretation of questions. You should consult with your legal, tax, and accounting advisors to obtain advice regarding your specific situation. Our education materials and communications should be considered in connection with, and are not intended to replace or serve as a substitute for, your close review of the Guidelines, and legal, tax or accounting advice you are urged to obtain from your tax, accounting and legal advisors

Our communications are summaries or excerpts of the Guidelines, and may contain our opinions or interpretations of the Guidelines. There may be interpretations that are valid that differ from our interpretations and opinions. You are cautioned against placing undue reliance on our views and our educational materials.


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