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The Paycheck Protection Program for business owners

An important update

The United States capitol building on a sunny day. Washington D.C., U.S.A.

Important Update—Legislation signed into law on July 4, 2020 authorized the Small Business Administration (SBA) to approve Paycheck Protection Program (PPP) loan applications through the earlier of August 8, 2020 or until funds run out. This was an extension from the SBA’s original deadline of June 30, 2020.

In accordance with the SBA’s updated August 8 deadline, if you applied for a PPP loan, but did not receive a SBA loan number by the time of the SBA’s August 8 cutoff, you will be notified that your application will not be processed and has been cancelled.

We are monitoring proposals in the U.S. government related to a potential extension of the PPP. Please check back for the latest information.

For clients who received a PPP loan from the SBA through Bank of America, we look forward to supporting you as you begin the loan forgiveness phase of the program. We are working to deliver the best possible experience for you during this important time. We will email you with specific instructions on how and when you can apply when the PPP loan forgiveness application portal becomes available to you.

For up-to-date rules for the SBA’s PPP loan forgiveness process, including your covered period, the types of costs that are eligible for forgiveness and what documentation you will need to submit as part of your application, please visit the SBA website.

FREQUENTLY ASKED QUESTIONS

General

What is the Paycheck Protection Program (PPP)?
The Paycheck Protection Program is a federal relief program established by Congress and implemented by the U.S. Treasury Department and the Small Business Administration (SBA) with rules, requirements, protocols and processes that all participating banks, including Bank of America, must follow. The eligibility requirements are outlined for applicants on the U.S. Treasury and SBA websites.

What can I use these loans for?
As of June 5, 2020, the CARES Act, the Paycheck Protection Program Flexibility Act, and SBA rules and regulations state that loan proceeds can be used only for the following:

  • Payroll costs (as defined in the CARES Act and Section 2.f of the Small Business Administration's Interim Final Rule Docket No. SBA-2020-0015)
  • Costs related to the continuation of group healthcare benefits during periods of paid sick, medical or family leave and insurance premiums
  • Mortgage interest payments (but not mortgage prepayments or principal payments); rent payments; utility payments
  • Interest payments on any other debt obligations that were incurred before February 15, 2020. Also see FAQ about eligibility of interest on unsecured credit for loan forgiveness.
  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a Paycheck Protection Program loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a Paycheck Protection Program loan. If your EIDL loan was used for payroll costs, your Paycheck Protection Program loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the Paycheck Protection Program loan.

The SBA has further stated that if you use Paycheck Protection Program funds for unauthorized purposes:

  • The SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability, such as charges for fraud. If one of your shareholders, members or partners uses Paycheck Protection Program funds for unauthorized purposes, the SBA will have recourse against the shareholder, member or partner for the unauthorized use.

For complete details, visit the SBA, U.S. Treasury Assistance for Small Business and U.S. Treasury FAQ websites.

What counts as payroll costs?
As of April 2, 2020, the SBA has stated that payroll costs (as defined in the CARES Act and Section 2.f of the Small Business Administration's Interim Final Rule Docket No. SBA-2020-0015) include:

  • Salary, wages, commissions or similar compensation (capped at $100,000 on an annualized basis for each employee)
  • Cash tips or the equivalent
  • Payment for vacation, parental, family, medical or sick leave
  • Allowance for separation or dismissal
  • Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums and retirement
  • Payment of state and local taxes assessed on compensation of employees
  • For an independent contractor or sole proprietor: wages, commissions, income or net earnings from self-employment or similar compensation, capped at $100,000 on an annualized basis
  • Payroll costs must be paid to employees whose principal place of residence is in the United States

Will Bank of America pay fees to third-party agents who have assisted clients with the preparation of PPP loan applications?
In the absence of a pre-loan approval written agreement between the agent and Bank of America, Bank of America does not pay fees or other compensation to agents who represent or assist borrowers through the Paycheck Protection Program. 

Does Bank of America disclose the names of PPP recipients? Was my name disclosed by the SBA – or will it be in the future?
Bank of America does not publicly disclose the names of clients who receive PPP loans. However, in June, the Small Business Administration (SBA), in consultation with the Treasury Department, announced that it would release data regarding the loans made under the Paycheck Protection Program (PPP). On July 6, the SBA released information on 4.9 million PPP loans, including loans provided through Bank of America. The disclosure includes loan-level data, including business names, addresses, NAICS codes, zip codes, business type, demographic data, non-profit information, name of lender, jobs supported, and loan amount ranges as follows: $150,000-350,000, $350,000-1 million, $1-2 million, $2-5 million, $5-10 million. For loans below $150,000, SBA released all of the above information except for business names and addresses. For more information, please visit the SBA website.

Loan forgiveness

What changes has the SBA made to the PPP rules and how do they impact the loan forgiveness process?
The Paycheck Protection Program Flexibility Act, signed into law on June 5, 2020 contained the following changes:

  • You now have a 24-week “covered period,” the period in which you must spend the PPP loan proceeds for full loan forgiveness, starting on the date the funds were disbursed. If your PPP loan was funded prior to June 5, 2020, you still have the option to use the original 8-week covered period.
  • You must use at least 60% of funds for eligible payroll costs to qualify for full loan forgiveness, down from 75%
  • You can use up to 40% of funds for eligible non-payroll costs, up from 25% 

You can find up-to-date information on the rules of the program on the SBA website.

Will there be additional changes to the PPP loan forgiveness process?
You may have seen press reports and other references to proposals in the U.S. government to simplify the forgiveness application process; for instance, for borrowers who received PPP loans of $150,000 or less. While it is not known if or how those proposals or potential changes might proceed, we understand these reports may influence decisions on when to apply. Please visit the SBA website or the U.S. Treasury Assistance for Small Businesses website for the most accurate updates on U.S. government policies about the PPP.

When can I apply for loan forgiveness?
We are working to deliver the best possible experience for you during this important time and plan to begin opening our PPP loan forgiveness application portal to clients in August. We will email you with specific instructions on how and when you can apply.

As a reminder, based on the latest updates from the SBA, you now have more time to gather your documents and prepare your application. The timeframe for applying for loan forgiveness in the promissory note no longer applies.

You can also expect your Bank Representative to be in touch with you to help you through this process.

How long do I have to apply for loan forgiveness? 
The timeframe for applying for loan forgiveness in your promissory note no longer applies. You now have more time to gather your documents and prepare your application. 

You may submit a loan forgiveness application any time after the end of your covered period, but on or before the maturity date of your loan. We will notify you by email of any changes to your loan forgiveness application window.

Which PPP loan forgiveness application should I use?
In an effort to make it easier for some businesses to apply for PPP loan forgiveness, the SBA published a new PPP EZ Loan Forgiveness Application Form 3508EZ for borrowers that meet certain requirements. To determine if you are able to use the EZ application, you should review the Checklist for Using SBA Form 3508EZ on the SBA’s website. 

Borrowers that do not meet the requirements for using Form 3508EZ will apply using the updated PPP Loan Forgiveness Application Form 3508.

Can I submit a paper application for PPP loan forgiveness?
Applications for PPP loan forgiveness at Bank of America must be submitted digitally through our online PPP loan forgiveness application portal. We will not accept paper loan forgiveness applications.

How can I prepare to apply for loan forgiveness?
Once you determine which SBA Loan Forgiveness Application Form you will use, we recommend that, prior to applying online through Bank of America for PPP loan forgiveness, you carefully review and fill out the applicable form, and gather the required documentation specified in the instructions: 

Who determines the amount of loan forgiveness?
The U.S. Treasury and Small Business Administration (SBA) are responsible for the rules of the program, which determine the amount of loan forgiveness you may receive. This can include full, partial or no forgiveness.

We encourage you to visit the U.S. Treasury and SBA websites for the most up-to-date program rules and guidance.

How is the amount of owner compensation that is eligible for loan forgiveness determined?  What if I am an owner of multiple businesses with multiple PPP loans?
The applicable Interim Final Rules (IFRs) and FAQs provide that the amount of compensation of owners who work at their business that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-week Covered Period. The amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at the lesser of $20,833 per individual or the 2.5-month equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. For borrowers that received a PPP loan before June 5, 2020 and elect to use an eight-week Covered Period, this cap is $15,385 per individual or the 8 week equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. If their total compensation across businesses that receive a PPP loan exceeds the cap, owners can choose how to allocate the capped amount across different businesses

Is interest on unsecured credit eligible for loan forgiveness?
As of August 4, 2020, in Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, the SBA stated that payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.

Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP owner-employee compensation rule when determining the amount of their compensation that is eligible for loan forgiveness?
As of August 24, 2020, in an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs, the SBA clarified that, for C- and S-Corp borrowers, owners with less than a 5% ownership stake are exempt from the owner-compensation cap.

Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, in the context of home-based businesses, household expenses, eligible for forgiveness?
No.  As of August 24, 2020, in an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs, the SBA has stated that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses.  The IFR provides four examples:

1) If a borrower rents a building for $10,000/month and subleases a portion of the building for $2,500/month, only $7,500 of the rent is an eligible non-payroll expense.

2) If a borrower has a mortgage on a building and leases 25% of the fair market value of the building to other businesses, only 75% of the mortgage expense is eligible.

3) If a borrower operates out of a shared rental, it must prorate rent and utilities as it did on its 2019 tax filings (or, for new businesses, as it will on its expected 2020 tax filings).

4) If a borrower works out of their home, only the share of covered expenses that were deductible on their 2019 tax filings are eligible for forgiveness (or, for new businesses, expected 2020 tax filings).

Can I apply for forgiveness prior to the end of my elected Covered Period?
No. The current SBA application for PPP loan forgiveness contains certain representations and documentation requirements that relate to the end of the Covered Period. As a result, you will only be able to apply for loan forgiveness through Bank of America once your Covered Period has ended.

What utility payments are eligible for forgiveness?
Business payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020.

Are rent payments made to related parties eligible for forgiveness?
As of August 24, 2020, in an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs, the SBA has stated rent payments to related parties are eligible for forgiveness so long as 1) “the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business” and 2) “the lease and mortgage were entered into prior to February 15, 2020.”  Borrowers must provide mortgage interest documentation to substantiate these payments.  And where the payor requests forgiveness for amounts paid to a related party, the related party cannot also request forgiveness for that same amount.  Additionally, “[w]hile rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness.”

Where should I go if I have questions?
For detailed information on the application, covered periods, the types of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.

For questions related to PPP, please contact your Bank Representative. 

Bank of America is committed to supporting you and all of our clients during this challenging period. 

Important Note: The Small Business Administration and the Department of Treasury continue to provide additional guidance concerning the Paycheck Protection Program. Thus, Bank of America makes no representation that information contained herein is up-to-date or complete. Before submitting a request for loan forgiveness, borrowers may wish to visit the SBA, U.S. Treasury Assistance for Small Businesses, and U.S. Treasury FAQ websites for the latest information and guidance related to the Paycheck Protection Program.

 

 

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