Congressional Bank is committed to assisting our small business customers during this challenging time. We are working diligently to process applications that we are receiving.
See below for some frequently asked questions we’ve received from our customers about the PPP:
Do I qualify / Am I eligible for a PPP First-Draw loan?
The eligibility criteria for a PPP loan are significantly simplified versus a standard SBA loan. A “small business” is defined for the purposes of PPP as businesses with fewer than 500 employees, though certain industries have higher thresholds (some as high as 2,000, so please ask your banker if your industry may qualify you if you have greater than 500 employees). Sole proprietors, independent contractors and certain self-employed individuals are also eligible for a PPP loan. To qualify, an applicant must certify that:
- the uncertainty of current economic conditions necessitates the loan;
- the funds will be used to retain workers and maintain payroll, or make mortgage payments, lease payments, or utility payments; and
- the applicant has not otherwise received another loan under the PPP from the period beginning on February 15, 2020, and ending on December 31, 2020.
The U.S. Small Business Administration has issued a new interim final rule on the Paycheck Protection Program that clarifies the loan eligibility of various types of entities. This interim guidance also formally inserts into the PPP program guidance a new safe harbor targeting PPP applicants who may not have fully considered the attestations for participation in the program, discussed below.
The Borrower Application Form requires PPP applicants to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request.
Who should apply?
You should apply as Business if you are:
- A representative of a Business Entity (Corporation, LLC or Partnership).
- A Sole Proprietor who operates a Business with Employees
You should apply as an Individual if you are:
- An Independent Contractor who Receives his/her Income on Form 1099 and reports Profit or Loss on IRS Form 1040, Schedule C
- A Sole Proprietor who Operates a Business without Employees and Reports Profit or Loss on IRS Form 1040, Schedule C
- A single-member LLC who reports Profit or Loss on IRS Form 1040, Schedule C
How much could I receive through the PPP?
The maximum loan size (for first draws) is capped at the lesser of $10 million and 2.5x the average monthly payroll cost for a business in 2019 (capping annual compensation for any individual employee at $100,000).
If you are a Business:
- Payments to independent contractors are excluded
- Payments to employees residing outside the U.S. are excluded
- Self-Employment Income of partners (capped at $100,000 for any individual partners) reported on Schedule K-1 Box 14(a) is included (or Schedule C income using line 31, capped at $100,000). Partners do not file for a separate PPP loan as individuals.
If you are an Individual:
- Your Net Income from your business reported on line #31 of your 2019 Form 1040 Schedule C is included (capped at $100,000 for you).
What documents should I gather so my application will be processed as quickly as possible?
The document requirements are much less than a typical SBA 7(a) loan, and if you are looking to get a head start, you should collect:
- See here for a checklist of required documents (subject to change as the SBA updates guidance)
There may be additional documents required on a case-by-case basis.
What are the loan terms?*
The interest rate on PPP loans is 1.0%, and there are no personal guarantee or collateral requirements as is typically the case with a standard SBA 7(a) loan. Additionally, all PPP loans have complete payment deferral for an initial period of at least 10 months, and the loan may be forgivable entirely under certain situations.
When would the loan be forgiven?*
The loan can be forgiven in the amount of the sum of the eligible expenses incurred in the 24-week period following the loan disbursement (up to the full amount of the loan). Eligible expenses include:
- Payroll (excluding salary above $100,000 for any employee). To ensure full forgiveness, 60% of eligible expenses should be payroll, per Treasury guidance
- Interest on mortgages
- Utility payments
This forgiveness may be proportionally reduced if the business reduces employees or reduces wages by more than 25% for an employee per a formula prescribed by the SBA. Canceled indebtedness will not be added to taxable income.
Can you give me an example of how this works?
As an example, if a business with 3 employees has an average monthly payroll (including PTO and healthcare benefits) of $25,000 in the previous 12 months, it would be eligible for a maximum loan of $62,500. This loan would have an interest rate of 1.0% but not have any payments due for at least the first 10 months. For the 24-week period following the disbursement of the loan, if the business then incurs eligible payroll expenses (wages plus health insurance) of $50,000 and rent was $12,500 or greater, then the loan balance is eligible for 100% forgiveness. If there was a loan balance remaining after the 24 week period, it would be amortized over five years.
Talk to Us
For questions or to be contacted by a Congressional Bank employee regarding the CARES Act loan program, please email email@example.com
We are not accepting applications through the above email address, all applications should be submitted here.
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* Please note that this information is subject to change and Congressional Bank will provide the requisite disclosures that are required for the PPP at the time of application.