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On Friday, March 27, 2020, the Federal stimulus bill in response to COVID-19 virus, known as the CARES Act, was signed into law.  This legislation included the U.S. Treasury and U.S. Small Business Administration (“SBA”) loan program known as the Paycheck Protection Program (PPP).  This program was officially launched on April 3rd with an initial allocation of $349 billion in funds.  By April 16th, the SBA informed its lending partners that the initial funds allocated to the program had been fully committed and that no additional applications would be accepted.  On April 24th, new legislation was signed into law providing an additional $310 billion in funds to the program.

American State Bank was successful in helping over 200 customers with approximately $30MM in funding under round one of the Paycheck Protection Program.  American State Bank is currently accepting applications for future submission to the SBA.  Please see “How to Apply” below for information related to applying for a PPP loan.

Due to the significant demand for the program, it is anticipated that this second round of funding will be exhausted quickly.  As such, submitting an SBA Paycheck Protection Program Borrower Application (SBA  Form 2483) and required supporting documentation does not guarantee approval by the SBA or funding of the SBA loan. 

Paycheck Protection Program Overview

The Paycheck Protection Program (“PPP”) is a temporary expansion of the traditional U.S. Small Business Administration (SBA) 7(a) loan program designed to provide a direct incentive for small businesses to keep workers on their payroll during the COVID-19 pandemic.  The Paycheck Protection Program is a loan program administered by the federal government and facilitated by various lending institutions including American State Bank.

A key benefit of a PPP loan is that a portion, if not all, of the requested loan may be forgiven by the federal government at the end of the eligibility period if certain conditions of the use of funds and other conditions are met.

Please see the most up-to-date information on the PPP Program and the Forgiveness Process on the U.S. Department of Treasury website.


Paycheck Protection Program Forgiveness Process

On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act (“PPPFA”).  As a result, the U.S. Small Business Administration, in consultation with the U.S. Department of Treasury have issued new and revised guidance for the Paycheck Protection Program (“PPP”) impacting loan forgiveness.  The following outlines the key changes provided by the PPPLFA:

  • The Covered Period for loan forgiveness has been extended from eight weeks after the date of loan disbursement to 24 weeks, which provides greater flexibility for borrowers to qualify for loan forgiveness. (Borrowers who have already received PPP loans retain the option to use an eight-week covered period.)
  • The requirement that 75% of loan proceeds and 75% of the forgiveness amount must be spent on payroll has been reduced to 60%, and those borrowers who fail to use 60% of proceeds may remain eligible for partial forgiveness.
  • A safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by various government entities related to worker or customer safety requirements related to COVID–19.

Forgiveness Application Submission Timing

The SBA has yet to issue guidance outlining the process for banks to submit forgiveness applications to the SBA for approval.  As such, it is recommended that borrowers review and become familiar with SBA Forgiveness application, but we request that applications are not submitted to the Bank until further guidance is issued by the SBA. 

Please see the U.S. Department of the Treasury website.