Paycheck Protection Program Loan

As part of the CARES Act that passed on Friday, March 27, the Paycheck Protection Program Loan will aid Small Businesses with 500 employees or fewer to keep their doors open. This is a program dedicated to cash-flow assistance for up to an 8-week period as part of the pandemic relief. As long as employers maintain payroll, the portion of the loan used to cover payroll costs, interest on mortgage obligations, rent, and utilities will be forgiven.  

Many of you may have seen the President's press conference this evening where Treasury Secretary Mnuchin declared that details have been released and they anticipate the electronic submission portal to process PPP loans will be available tomorrow (Friday).  While I applaud the Treasury and SBA for the progress they have made, there are details still outstanding regarding access to the portal, loan documents, and timing of funding.

We did learn some new details in the guidance released tonight that I wanted to share.  Many of you are likely reading this Friday morning, however our NexTier Bank team is working late in the night trying to analyze and prepare things to be able to receive applications tomorrow.  

First, NexTier Bank is a participant in the program and will be available to support our business and non-profit customers.

Second, most loan terms remain the same.  However, the interest rate had been increased to 1%, contrary to previous guidance.  The interest on portions of the loan used for permissible expenses remains eligible to be forgiven.  In addition, no payments are required in the first 6-months of the 2-year loan term.

Third, additional guidance clarification was provided regarding eligible payroll costs.  1099 expenses to independent contractors are not included in your PPP loan calculation.  The theory is that the independent contractor operates as a sole proprietor and can therefore apply separately for a loan.  

Tips or similar compensation are specifically included as payroll costs.  The amount needs to supported through employer records of past tips, or in the absence of such records, a reasonable good faith employer estimate of such tips.

Self employed individuals are eligible and will need to provide documentation showing net earning or similar compensation.  Completion of 2019 taxes would be very helpful in this case, although there may be other methods available.

These are the biggest news makers of our reading of the guidance so far.  Certainly things remain fluid and we will work diligently to keep you up to date.  We do encourage you to talk with your tax accountant/financial planners to ensure you understand your eligibility and the appropriate loan amount.

NexTier Bank is proud to serve you and we stand ready to help you.  

Stay Safe and Healthy.

Clem Signature_blue

Clem Rosenberger
President & CEO

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