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Paycheck Protection Program

Round Two

On December 21st, Congress passed a $900 billion COVID-19 relief package as part of the Economic Aid Act (EAA) that was signed into law on December 27th. Included in that amount is $284 billion for a second round of the Paycheck Protection Program (PPP). The second round of the PPP expires the earlier of May 31, 2021 or depletion of $284 billion fund.

Seamen’s Bank is participating in the new round of Paycheck Protection Program (PPP) loans that was authorized as part of the EAA. We will only accept loan applications and supporting documents through our online portal; we will not accept delivery of documents by any other method. Due to our desire to process as many applications for our small business community as possible, Seamen’s Bank staff will only be available to answer specific questions through the application process.

Please be advised that the SBA requires lenders to disburse approved PPP loan proceeds within 10 calendar days of SBA approval.  Also note that the 8- or 24-week time period to use your PPP loan proceeds for qualified expenses begins on the date the loan is disbursed.  The forgiveness criteria remain consistent with the first round of PPP loans with a minimum of 60% of the loan to be used for payroll expenses and no more than 40% to be used for other eligible non-payroll expenses. Borrowers who received their first draw loans in 2021 may be able to apply for a second draw loan if they had at least a 25% reduction in revenue in 2020 and the first draw loan can be forgiven prior to the funding of the second draw loan. However, the loan forgiveness covered period is a minimum of 8 weeks and the second draw loan cannot be funded earlier than 8 weeks from the funding date of the first draw loan.

PPP Portal

Please click here to access the Portal

*This platform contains the Paycheck Protection Program loan application and forgiveness application.

 

Important Items
  • Google Chrome or Microsoft Edge are the optimal browsers for navigating the portal
  • Please review the document requirements for your specific entity type. The document categories listed in the application are broad and may not reflect the actual documents required.  For example, corporations might not have to provide 1120 or 1120S tax returns but must provide 941 IRS forms.
  • Non-profits need to enter one principal as 100% owner under “Section 2: Business Owners” to move forward with the application. The back office processing recognizes that there is no ownership with non-profits and will adjust the entry accordingly.
  • For loan amounts of $150,000 or less, documents supporting the 25% reduction in revenue criteria are not required with the application. If not provided with the Loan application, you must provide documentation with the Forgiveness application and if it does not support the 25% reduction criteria, you may be required to repay the loan.
  • Although completion of Forgiveness for the business’ first loan is not required to apply for the second draw, please be sure that you have eligible expenses for 100% forgiveness of the first loan or you may be required to repay the second draw loan.
Borrower Tutorial Video
Contact

Email Address:  commercial.lending@seamensbank.com

Tom Johnson – 774-538-3829
Amy Silva – 774-538-3859
Maria Larouco – 774-538-3805

Below are summary guidelines for determining eligibility, loan calculations and documentation requirements.

Eligible/Ineligible Entities
Eligible Entities
    • Businesses that were in operation as of February 15, 2020
    • Business with less than 300 full-time, part-time, or seasonal  employees; if you have multiple locations, you may not have more than 300 employees per location
    • Sole proprietorships, independent contractors, self-employed individuals, certain non-profits (including 501(c)(6) organizations)
    • Seasonal businesses (defined as operates no more than 7 months annually or earned no more than 1/3 of its receipts (gross revenue) in any six months in the prior calendar year (2019)
    • Faith-based organizations that have less than 150 employees
Ineligible Entities
  • Entities that have received or will receive a grant under the Shuttered Venue Operator Grant program
  • Business not in operation on February 15, 2020
  • Lobbying organizations; Organizations involved in political activities or public policy; Lenders or financial services businesses; Cannabis businesses (or any other businesses that deal with products that are illegal at the federal level); Household employers (such as those who employ housekeepers or nannies); Businesses that have defaulted on SBA or federal loans; Any business that is at least 20% owned by someone who is currently incarcerated, on probation, on parole, or subject to an indictment; Any business that is at least 20% owned by someone who has been convicted of a felony within the last five years; Entities affiliated with the People’s Republic of China or Hong Kong or that have a member on their board of directors that is a resident of the People’s Republic of China; Registrants under the Foreign Agents Registration Act
Eligibility Criteria
Eligibility Criteria
  • If the business received a PPP loan in the first round, it must have used all of the PPP loan funds for eligible expenses during its covered period1
  • A 25% or greater reduction in gross receipts2 must be shown by comparing the gross receipts in any quarter in 2020 with the same quarter in 2019. For example, if a business recorded $20,000 in the second quarter (Q2) of 2019, they must show a 25% reduction in Q2 2020.  If the business recorded $15,000 or less in Q2 sales in 2020, they are eligible to apply for a second PPP loan.  For smaller businesses, such as sole proprietorships, and contractors that do not maintain quarterly records, a 2020 to 2019 full year comparison is acceptable.  There is additional criteria for businesses that were not in operation for all of 2019.3

1 From page 6 of the IFR on second draw loans: “In addition, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower.  Accordingly, subsections (c)(1)(i) through (c)(1)(iv) of this IFR implement these criteria. Subsection (c)(1)(ii) of the IFR clarifies that “the full amount” of the borrower’s First Draw PPP Loan includes the amount of any increase on such First Draw PPP Loan made pursuant to the Economic Aid Act. In addition, subsection (c)(1)(ii) of the IFR clarifies that the borrower must have spent the full amount of its First Draw PPP Loan on eligible expenses under the PPP rules to be eligible for a Second Draw PPP Loan. This clarification will help ensure program integrity by preventing a borrower from receiving a Second Draw PPP Loan if the borrower has not complied with PPP loan program requirements.”

2Gross receipts do not include taxes collected for and remitted to a taxing authority if included in gross or total income, proceeds from transactions with an affiliate, and amounts collected for another by a travel agent, real estate broker, advertising agent, freight forwarder or customs broker.

3Refer to Section H(c)(iv) on page 21 of the SBA’s IFR on Second Draw PPP Loans at https://www.sba.gov/sites/default/files/2021-01/PPP%20–%20IFR%20–%20Second%20Draw%20Loans%20%281.6.2021%29-508.pdf.

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Loan Terms and Permissible Use of Funds
Permissible Use of PPP Funds
  • The new PPP loan funds must continue to be used at least 60% for payroll and no more than 40% for non-payroll expenses.
  • Congress expanded the types of non-payroll expenses for which all PPP loans can be used, including first round PPP loans that have not yet been submitted for forgiveness. In addition to rent, covered mortgage interest and utilities, the PPP now allows proceeds to be used for:
              • Operational expenses for software (installed or cloud)
              • Property damage from looting and vandalism
              • Supplier costs of goods that are essential to the operations of the entity
              • Worker protection from COVID expenses such as drive thru windows, barriers, PPE, etc.
Loan terms
  • 5 year Term
  • 1.00% Interest Rate
  • Payments deferred until the loan forgiveness amount is determined and forgiven by the SBA
  • P&I payments on any amount not forgiven will begin the earlier of one month from the SBA forgiveness date or 10 months following the end of the covered period.

 

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PPP Loan Limitations and Calculation of Average Monthly Payroll Costs
Maximum Loan Amount

The maximum loan amount of the second round PPP is the lesser of:

  • $2 million
  • 2.5 times the average monthly payroll costs and healthcare costs in the year prior to when the loan was received (calendar year 2020) or within calendar year 2019 as defined by the EAA.
Eligible Payroll Costs

Eligible payroll costs consist of:

  • Employee compensation (gross wages and tips limited to $100,000 annually) for employees whose principal place of residence is the United States
  • Employer group health, life, disability, vison and dental insurance contributions 
  • Employer health retirement contributions
  • Employer state and local taxes assessed on employee compensation (primarily state unemployment insurance tax)
Seasonal Businesses
Seasonal businesses may calculate their maximum loan amount based on the monthly payroll average of any 12-week period beginning February 15, 2019 through February 15, 2020.

As noted above, the average monthly payroll for year round businesses can be determined using 12 month of payroll costs for either 2019 or 2020

New Entities
New entities in operation prior to February 15, 2020 (but that did not exist during the 1-year period preceding February 15, 2020), may receive a loan based on the average monthly payroll cost for the period through loan application date in which payroll costs were incurred.
Self-employed, Sole Proprietorships and Contractors

Self-employed, sole proprietorships, contractors and single-member LLCs can determine their loan amount based on either gross income (line 7 of Schedule C) or net profit (line 31 of Schedule C) from their 2019 or 2020 IRS form 1040.  A draft copy of the 2020 Schedule C is acceptable if the 2020 tax return has not been filed (Note that if your filed 2020 Schedule C reports a lower operating income on line 31 than what was provided at the time of loan application, you might not receive full loan forgiveness).  The maximum monthly owner compensation is $8,333.33 and the maximum loan amount is $20,833.  These amounts are based on maximum eligible gross income or net profit of $100,000.

For Schedule C filers without employees, the loan amount is calculated based on either gross income or net profit divided by 12 months, times 2.5  (Example:  $75,000 gross income/12 = $6,250 average monthly owner’s compensation X 2.5 = $15,625 loan amount.)

For Schedule C filers with employees that base their loan on net profit (line 31), combine average monthly payroll for all eligible employees with the Schedule C average monthly amount derived from net profit (owner compensation) to calculate the total average monthly payroll to be entered in your loan application.

For Schedule C filers with employees that base their loan on gross income (line 7), combine average monthly payroll for all eligible employees with the monthly calculated owner compensation.  When using Schedule C gross income, owner compensation is calculated by deducting the following line items from gross income:

  • line 14 – employee benefit programs;
  • line 19 – pension and profit-sharing plans; and
  • line 26 – wages (minus employment credits)

Please note that businesses electing to use gross income to calculate their first-draw PPP Loan will only have a safe harbor presumption of making the necessary certification of economic necessity if they reported $150,000 or less in gross income on their Schedule C being used to apply for a first-draw PPP loan. Borrowers with reported gross income greater than $150,000 may be subject to a review by SBA of their certifications.  Second-draw PPP loan eligibility requires a 25% revenue reduction and will  automatically have the presumption of economic necessity.

Partnership
Partnership -Calculation of payroll costs (divide total by 12 and multiply by 2.5X or 3.5x):

  • 2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of individual U.S. based general partners that are subject to self-employment tax, computed from box 14a (reduced by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties) multiplied by 0.9235,2 up to $100,000 per partner (if 2019 schedules have not been filed, fill them out)
  • 2019 gross wages and tips paid to your employees whose principal place of residence is in the United States, if any, which can be computed using 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips, subtracting any amounts paid to any individual employee in excess of $100,000 and any amounts paid to any employee whose principal place of residence is outside the U.S
  • 2019 employer contributions for employee health insurance, if any (portion of IRS Form 1065 line 19 attributable to health insurance)
  • 2019 employer contributions to employee retirement plans, if any (IRS Form 1065 line 18); and
  • 2019 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms), if any
Documentation Requirements for Loan Application
Eligibility Documentation
  • Copy of driver’s License for the individual authorized to apply for the loan and all owners with 20%+ share in the business: A color copy of the front and back of a valid Driver’s License for each owner. Make sure to double-check that the Driver’s License is not expired
  • Articles of Organization or other organizational documents – Required for all types of corporations, partnerships and non-profits unless the applicant is a Seamen’s Bank commercial borrower or received a first round PPP loan through Seamen’s Bank
  • Screenshot or other evidence that annual report filed with the Secretary of State is current 
  • For non-profit organizations, a board resolution or vote authorizing the person applying for the loan to borrow on behalf of the organization
Documentation for 25% Revenue Reduction Test
  • For loans greater than $150,000: at the time of loan application, the borrower must provide relevant tax forms or quarterly financial statements comparing the selected quarter of 2020 to the same quarter of 2019 to establish that the applicant experienced a 25% or greater reduction in gross receipts in 2020 compared to 2019
  • For loans of $150,000 or less: the borrower can submit a certification statement (included in the loan application) that it meets the revenue loss requirement at the time of loan application and provide proof of revenue loss before or at the time the borrower applies for loan forgiveness.
    • For smaller businesses that do not maintain quarterly financial records such as contractors and sole proprietorships, you may provide a comparison of Schedule C operating income for 2020 compared to 2019 (a draft 2020 Schedule C is acceptable but if the Schedule C filed with the IRS differs in revenue or operating income, you may be required to repay the loan or not receive full forgiveness)

If quarterly financial statements are not audited, the applicant must sign and date the first page and initial all other pages attesting to their accuracy.  If 2020 tax returns are provided and have not yet been filed, you must sign and date the draft tax return attesting to its accuracy. (refer to  Question #4 of the SBA document – How to Calculate Revenue Reduction)

Payroll Documentation
Below are the documents required to be submitted with the PPP loan application according to the entity’s business type.  LLCs should follow the requirements that apply to their tax filing situation, for example, whether they file as a sole proprietor, a partnership, or a corporation.
Self-employed, Sole Proprietors and Contractors
  • IRS Form 1040 Schedule C for 2019 or 2020, depending on the year being used to calculate loan amount (2020 may be a draft copy)
  • IRS Forms 1099-MISC detailing nonemployee compensation received (box 7) for 2019 or 2020
  • Invoice, bank statement, or book of record establishing you were self-employed in 2019
  • Invoice, bank statement, or book of record establishing you were in operation on February 15, 2020.
C-Corp and S-Corps
  • Third-party payroll provider statements or bank statements for the applicable period – 12 month calendar year; seasonal 12-week period anytime from February 15, 2019 to February 2020; or a specified period through PPP loan application date for entities not in existence in 2019 but in operation prior to February 15, 2020 (Must provide employee compensation detail for time period used for average monthly payroll calculator)
  • IRS Forms 941 for the applicable quarters during the selected year – 2019 or 2020
  • Copies of the applicable quarterly wage unemployment insurance tax forms submitted to the Massachusetts Department of Unemployment Assistance
  • Copy of IRS 1120 or 1120S or other documentation of any employer paid retirement or health insurance contributions
  • Payroll statement or other similar document from the pay period that covered February 15, 2020 showing the entity was in operation and had employees on that date.
LLPs and Partnerships
  • IRS Form 1065 with all Schedule K-1s for 2019 or 2020
  • If the partnership has employees:
  • Third-party payroll provider statements or bank statements for the applicable period, including employee compensation (Must provide employee compensation detail for time period used for average monthly payroll calculator)
    • IRS Forms 941 for the applicable quarters during the selected year – 2019 or 2020
    • Copies of the applicable quarterly wage unemployment insurance tax forms submitted to the Massachusetts Department of Unemployment Assistance
    • Records of any retirement or health insurance contributions paid for employees during the relevant period
    • A payroll statement or similar documentation showing the partnership had employees on February 15, 2020.
  • If the partnership did not have employees, an invoice or bank statement showing the partnership was in operation on February 15, 2020
Non-Profit and Religious Organizations
  • Third-party payroll provider statements or bank statements for the applicable – period 2019 or 2020 (Must provide employee compensation detail for time period used for average monthly payroll calculator)
  • IRS Forms 941 for the applicable quarters during the selected year – 2019 or 2020
  • Copies of the applicable quarterly wage unemployment insurance tax forms submitted to the Massachusetts Department of Unemployment Assistance
  • Documentation of any employer paid retirement or health insurance contributions
  • Payroll statement or other similar document from the pay period that covered February 15, 2020 showing the entity was in operation and had employees on that date.
  • Board resolution authorizing signer to apply for the PPP loan

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