Paycheck Protection Program Round 3 Questions

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.

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.

First-time Borrower requirements:

• Your Rockland Trust Business Checking account number (so that we are able to deposit your PPP funds)
• 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

If you already received a PPP loan, you may apply for a Second Draw PPP loan if:

• You have a Rockland Trust Business Checking account number (so that we are able to deposit your PPP funds)
• 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.

Calculating a Loan

How do I calculate my requested loan amount?

Businesses applying for a First or Second Draw PPP loan can receive a loan amount of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million. 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.

Seasonal businesses may calculate their maximum loan amount based on a consecutive 12-week period between February 15, 2019 and February 15, 2020.

What qualifies as a seasonal business?

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.

Documentation

What documents are required to apply for a First Draw PPP loan?

• 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

What documents are required to apply for a Second Draw PPP loan?

• 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
• Financial statements or tax forms to support the 25% reduction in revenue for the periods referenced in the application
  • 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
  • Not for profits: Gross receipts within the meaning of section 6033 of the Internal Revenue Code of 1986
    
    

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.

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.)

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.

The new legislation also 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. For those loans where Forgiveness has been received and an EIDL advance has been deducted, the SBA will automatically issue reconciliation payment to Rockland Trust for the previously deducted EIDL advance amount, plus interest through the remittance date.

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.