Eligible Applicants - Utah's Credit Unions



SAMPLE POLICY LANGUAGE (Can be incorporated in to an MBL or general loan policy)The Credit Union will temporarily make loans under the Small Business Administration (SBA) Paycheck Protection Program (PPP).The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Applications will be accepted through June 30, 2020.The credit union will obtain approval from the SBA to make and service PPP loans. The credit union will not make other SBA loans.SAMPLE PROCEDURES (These procedures will be updated as additional information is released by the SBA. Last Updated: April 3, 2020, based on the Interim Final Rule issued on April 2, 2020)Eligible ApplicantsLoan Applicants must meet the following conditions:Be a member of the credit union or eligible for membershipBe a business (including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, independent contractors)Have been in operation on February 15, 2020Have 500 or fewer employees:Employees principal place of residence must be in the United StatesBusinesses in certain industries may have more than 500 employees if they meet the?SBA’s size standards?for those industriesSmall businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligibleIneligible ApplicantsIneligible Applicants include:Applicants engaged in any activity that is illegal under federal, state, or local lawsHousehold employers (individuals who employ household employees such as nannies or housekeepers)An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five yearsThe applicant, or any business owned or controlled by the applicant or any of the applicant’s owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.Application ProcessApplication start datesApril 3, 2020: Small businesses and sole proprietorshipsApril 10, 2020: Independent contractors and self-employed individualsApplication FormThe applicant must complete SBA Form 2483 (Paycheck Protection Program Application Form) and submit it to the Credit UnionThe Credit Union must submit HYPERLINK "" SBA Form 2484 (Paycheck Protection Program Lender’sApplication for 7(a) Loan Guaranty) electronically in accordance with program requirementsPayroll DocumentationThe applicant must submit payroll documentation to the Credit Union:Payroll documentation for small businesses and non-profits can include:Payroll processor recordsPayroll tax filingsPayroll documentation for sole proprietors, independent contractors and self-employed individuals can include:Form 1099-MISCIncome and expense statementBank recordsUnderwritingLoans made under the PPP are 100% guaranteed by the SBA. Very little underwriting will be required, but the Credit Union will need to do the following:Confirm receipt of borrower certifications contained in Paycheck Protection Program Application formConfirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s applicationFollow applicable Bank Secrecy Act requirements (CIP, OFAC, initial due diligence, obtaining a Beneficial Ownership Form for new members. FinCEN will not require a new beneficial ownership form for existing members applying for a PPP loan)Use of FundsThe proceeds of a PPP loan are to be used for:Payroll costsCosts related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiumsMortgage interest payments (but not mortgage prepayments or principal payments)Rent paymentsUtility paymentsInterest payments on any other debt obligations that were incurred before February 15, 2020Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020At least 75 percent of the PPP loan proceeds must be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs, include the amount of any EIDL refinanced.Loan AmountsLoans can be for up to two months of average monthly payroll costs from the last year plus an additional 25% of that amount (up to $10 million per applicant)Seasonal or new business will use different applicable time periods for the calculationPayroll costs are capped at $100,000 annualized for each employeeThe credit union will make loans according to the above amounts while also observing:Loan to one borrower limitsOverall member business loan limitsMaximum Loan Amount CalculationStepInstructions1.Aggregate payroll costs (see qualifying payroll costs below) from the lasttwelve months for employees whose principal place of residence is theUnited States2.For small businesses and non-profits: subtract any compensation paid to an employee in excess of an annual salary of $100,000For independent contractors, sole proprietors and self-employed individuals: subtract any amount paid in excess of $100,000 per year3.Calculate average monthly payroll costs (divide amount from step 2 by 12)4.Multiply the average monthly payroll costs from Step 3 by 2.5.5.Add the outstanding amount of an Economic Injury Disaster Loan(EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid)Qualifying Payroll CostsPayroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of:SalaryWagesCommissions, or similar compensationCash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)Payment for vacation, parental, family, medical, or sick leaveAllowance for separation or dismissalPayment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirementPayment of state and local taxes assessed on compensation of employeesFor an independent contractor or sole proprietor: wage, commissions, income, or net earnings from self-employment or similar compensation.Cost Excluded from Qualifying Payroll CostsAny compensation of an employee whose principal place of residence is outside of the United StatesThe compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessaryFederal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employeesQualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response ActAny amounts paid to independent contracts (independent contractors have the ability to apply for their own PPP)Loan TermsLoan terms will be the same for all applicantsBorrowers are permitted only one PPP loanNo origination fees will be charged1.00% fixed ratePayments: Deferred for six months (interest will continue to accrue), principal and interest payments after six monthsDue date: two years after originationPrepayment is allowed without penalty or feesNo collateral is requiredNo personal guarantees are requiredCompensationThe SBA will compensate lenders based on the balance of the financing outstanding at the time of final disbursement:Loans $350,000 and under: 5.00% Loans greater than $350,000 to $2 million: 3.00% Loans greater than $2 million: 1.00%DocumentationE-signatures and consents can be usedThe Credit Union should maintain the borrower’s application form and supporting documentation in its files.Loan ForgivenessThe amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes described below and employee and compensation levels maintained.Forgivable loan purposesPayroll costs (see “Qualifying Payroll Costs” above)Interest on mortgage obligations, incurred before February 15, 2020Rent, under lease agreements in force before February 15, 2020Utility payments under service agreements date before February 15, 2020, over the eight-week period following the date of the loan*Not more than 25% of the forgiven amount may be for non-payroll costs. The borrower will also owe money if they do not maintain staff and payroll. Number of Staff: Loan forgiveness will be reduced if the borrower decreases their full-time employee headcount. Level of Payroll: Loan forgiveness will also be reduced if the borrower decreases salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019The borrower has until June 30, 2020 to restore full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. Requesting Loan ForgivenessTo request loan forgiveness, the borrower will submit a request to the credit union. The request must include:Documents that verify the number of full-time equivalent employees and pay rates, Payments on eligible mortgage, lease, and utility obligations. A certification that the documents are true and that the borrower used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The Credit Union must make a decision on the forgiveness within 60 days. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download