Before applying, all potential borrowers should determine whether this loan is appropriate for their business or organization. Most importantly, the borrower must be prepared to certify that current economic uncertainty makes this loan request necessary to support ongoing operations. Here are other important guidelines to know:
SBA Paycheck Protection Program
As part of the coronavirus relief package that Congress passed on March 27th, 2020, the Small Business Administration has implemented the Paycheck Protection Program to help eligible employers pay their workers and other costs during the shutdown and reopening of the economy. This loan can be forgiven if the borrower uses the proceeds for payroll, rent, mortgage interest, and utilities. No personal guarantee or collateral is required. There are no fees or prepayment penalties for this loan.
Chain Bridge Bank is approved by the SBA to offer Paycheck Protection Program loans. All applications must be submitted through the Bank's online portal. All PPP loan application must be approved by June, 30, 2020.
- SBA-eligible small businesses of 500 or fewer employees (see the SBA size standards)
- 501(c)3 nonprofits meeting the size standard, including churches and other faith-based institutions
- Sole proprietorships, independent contractors and the self-employed
- Businesses in specific industries (e.g. restaurants) that have 500 or fewer employees per location
- Businesses primarily engaged in political or lobbying activities
- Nonprofits in politics and advocacy such as 527, 501(c)4, and 501(c)6 groups
- Passive investment concerns
- Household employers
- Offshore companies
- Startups that were not operational as of February 15th, 2020
- Otherwise eligible organizations without payroll costs as of February 15th, 2020
- Other types of businesses on the SBA
list of ineligible firms.
- Loan size is capped at 2.5 times the average monthly payroll costs (including fringe benefits) up to $10 million, excluding employee salary over $100,000
- Eligible new firms must have been operational as of February 15th, 2020
- 60% must be spent on payroll costs
- The loan is forgivable for payroll, rent, mortgage interest, and utilities expenses incurred during the 24 weeks following the loan origination
- Borrowers that cannot rehire or find qualified workers, or resume business operations due to federal public health requirements or guidelines, have a safe harbor from loan forgiveness reduction
- Payments on principal and interest are deferred until the SBA remits the forgivable loan amount
- The loan carries an interest rate of 1% and matures in two years if approved prior to June 5th or five years if approved on or after that date.
The terms for PPP loan forgiveness were recently changed by law to allow for more flexibility for borrowers. The SBA and Treasury are currently working on new regulatory guidance and a new loan forgiveness application form. Chain Bridge Bank, N.A. will open an online portal to process all PPP loan forgiveness applications once these documents are released. Borrowers should document their use of proceeds as they prepare to apply for loan forgiveness.
- To expedite the loan application review, certain payroll providers are offering a customized PPP report to their clients
- Vendors offering this payroll report include ADP and Paychex; applicants should contact their payroll provider if they are unsure if this is available
- If the payroll provider does not offer this report, applicants should document their calculation of the average monthly payroll cost used to determine the loan amount request
Simple instructions for calculating average monthly payroll cost and loan amount request:
- Calculate total payroll for either the last 12 months or calendar year 2019
- Subtract cash compensation to employees in excess of $100,000
- Divide by 12 to get eligible average monthly payroll
- Multiply average monthly payroll by 2.5 and to get eligible loan request amount
Potential borrowers can consult the U.S. Treasury's Paycheck Protection Program page or the SBA site for further details about the loan rules, requirements and frequently asked questions (FAQs).
Chain Bridge Bank looks forward to helping its qualified small business, non-profit, and other commercial clients and their employees access the aid they may be eligible for as a result of the economic shutdown.
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