A SPECIAL MESSAGE FOR OUR BUSINESS CUSTOMERS ABOUT CARES ACT PAYROLL PROTECTION
We are sure you have been hearing about the Payroll Protection Program that was approved as of Friday, March 27.
The following is a brief summary of the program:
• The Paycheck Protection Program will lend up to an aggregate amount of $349 billion during the period beginning retroactively on February 15, 2020 through June 30, 2020 (the “Covered Period”)
• Borrowers must certify to its lender that, among other things, a Loan is necessary in light of the economic uncertainty created by COVID-19
• Must be a small business with not more than the greater of 500 employees or the size standard in number of employees for the industry in which the entity operates as established by the Small Business Administration.
• The Loan will be unsecured with no guaranties or borrower fees.
• The maximum amount for which Loans may be issued is the lesser of (i) $10,000,000 and (ii) 2.5 times the average total monthly payments for payroll costs incurred during the 1-year period before the date the Loan is made. For seasonal employees, payroll from last April can be used.
• Proceeds can be uses to fund: payroll costs; group health care benefits during periods of paid sick, medical or family leave; insurance premiums; employee compensation; mortgage interest payments; rent; utilities; and interest on debt incurred prior to February 15, 2020.
• Payroll costs expressly exclude: (a) compensation of an individual employee in excess of an annual salary of $100,000 as prorated for the Covered Period, (b) withholding taxes, (c) compensation of persons whose principal place of residence is outside of the US, and (d) qualified sick leave and family leave for which a credit is allowed under the “phase 2” bill.
• The most notable feature of the Program is that borrowers are eligible for forgiveness of indebtedness on their Loan in an amount equal to the sum of payroll costs, mortgage interest, rent payments, and utility payments made by the borrower during the Covered Period. Forgiveness amounts will be considered canceled indebtedness by a lender and are not deemed income to the borrower. The amount of forgiveness available to the borrower will be reduced by both:
• a percentage related to the number of employees laid off during the Covered Period as compared to the same period during the prior year or during January and February 2020 (with a cure for employees rehired by June 30, 2020), and
• an amount related to reductions in salaries and wages of employees in excess of 25% during the Covered Period (with a cure for salaries and wages restored by June 30, 2020).
Borrowers must provide their lenders with complete documentation of the calculation of their forgiveness amounts.
The Bank of Bennington is authorized to make SBA 7A loans and is prepared to help you through this process.
The Small Business Administration will be providing the bank with the final procedures for this important program, which should be disseminated early this coming week.