Chelsea Groton Bank is working with the Small Business Administration (SBA) to provide relief funding through the Paycheck Protection Program (PPP) to area businesses. The PPP program is designed to provide a direct incentive for small businesses to keep their workers on the payroll. Please thoroughly review the program eligibility and FAQs here.
If you are a current business customer and are interested in applying for funding through Chelsea Groton Bank, please email us with your name, the name of your business, and your contact information including your cell phone number to get started. The SBA PPP Loan application can be found online. Additional supporting documentation such as recent business tax returns, 2019 and 2020 payroll statements (W2s, W3s, and/or 940s), and business organization documents are required. Self-employed individuals are eligible to apply. Learn more about who can apply and how payroll and the maximum loan amount is calculated.
Based on the extraordinary loan volume we are currently handling for this program, it is likely that your loan request may not be assigned to a banker for follow up for a number of days. In an effort to help area businesses access the critical funds that need in a timely manner, we've established a link with an alternate lender named Kabbage who may be able to connect you with these loans. If you choose to apply through Kabbage, please note that Chelsea Groton Bank is not able to provide application status updates, nor is Chelsea Groton Bank the lending institution you will be working with. Apply through Kabbage for the relief funds your business needs.
For businesses that have been approved for the SBA PPP Loan and are interested in learning more about SBA PPP Loan Forgiveness, please visit the SBA PPP program guidance resource page. If you have questions specific to your individual financial situation, please consult with your tax advisor, accountant and any other professional advisors.
SBA PPP Loan Forgiveness
If your business or organization has been the recipient of a SBA Paycheck Protection Program (PPP) Loan through Chelsea Groton Bank, or another participating lending institution, you may qualify to have the loan forgiven if the loan proceeds are used to pay certain eligible costs. Keep in mind:
- The amount of loan forgiveness will be reduced if less than 75% of the funds are spent on qualified payroll costs over an 8-week period, which begins when PPP loan proceeds are disbursed.
- Forgiveness is also based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, and/or if salaries and wages decrease.
- Ensure you are keeping good records of loan proceeds spent during this 8-week period, including receipts, copies of checks, and any other documentation that helps to verify how funds were used in order to support a forgiveness request.
Certification and attestation
In addition to the requirements above, new guidance was set forth from the Small Business Administration that applies to new loans and previously applied-for loans:
- At application time, borrowers assessed their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations. SBA now requires borrowers to take into account alternative avenues of liquidity, but has not provided standards for determining availability. Please consult with your tax advisor, accountant and any other professional advisors.
- Businesses that have received PPP loans or that are considering applying should carefully evaluate their currently available cash balances, as well as whether additional financing may be available from their lenders and financial sponsors and on what terms.
- Public companies with the ability to access public markets need to consider carefully whether they can make a need certification. While the new guidance in the FAQ directly addresses public companies, it is not limited to public companies, and all borrowers are required to take into account alternative capital resources.
- This guidance applies retroactively to PPP loan recipients.
What this means to you
The new guidance reinforces that borrowers should carefully analyze and be prepared to demonstrate to the SBA the need for a PPP loan. Borrowers should carefully document their process for determining the need for the PPP loan in board minutes and other materials. These should include cash flow projections, balance sheet and other relevant financial statements, and the availability of alternative financing (including terms, timing and other factors with respect any such financing).
While the need certification will depend on the facts and circumstances of each borrower, best would be a record demonstrating that a PPP loan would save the jobs of employees who are soon to be terminated or furloughed, as this would be aligned with the congressional intent of the PPP. Borrowers should be prepared to have their determinations of need scrutinized by the SBA -- both at the time of loan origination and upon application for loan forgiveness.
In addition, the SBA will conduct a "full audit" of PPP loans made in amounts over $2 million to ensure the borrower's legitimate economic need before they can be forgiven.
The SBA PPP guidelines allow for all or a portion of the loan to be forgiven if the proceeds are used for incurred payroll and certain non-payroll costs over the 8 weeks after receiving the loan proceeds. The final Loan Forgiveness Application with borrower instructions was released by the SBA on May 15th.
While details and components of the process are still being worked out, we recommend that you begin gathering the right information as soon as possible, in order to maximize your loan forgiveness and help make the process easier when it comes time to submit your documentation.
Here are action steps we recommend and a list of documents you should start collecting:
1. Make sure to follow guidelines for eligible loan forgiveness costs found on page 2 of the Forgiveness Application instructions.
2. Document how all loan proceeds were spent:
- List and provide supporting evidence of all employees on payroll the 8 weeks following the loan with the dollar amount of payroll costs (defined below).
- Evidence of mortgage interest payments, rent payments and utilities paid during the 8 weeks following the loan; include copies of cancelled checks and/or bank statements with ACH info and copies of utility and mortgage statements/lease agreement.
- Evidence of payroll costs, utilities, rent/lease payments and mortgage interest paid before February 15, 2020 to compare to what is paid or incurred during the 8 weeks following the loan closing to ensure it aligns. If self-employed, these expenses are allowed to the extent they are deductible on Form 1040 Schedule C.
- Copy of EIDL loan if refinanced with PPP loan (be sure to identify how much was an advance that does not have to be repaid).
- If you used PPP to refinance an EIDL loan, only the funds used for payroll costs will be forgiven, so be prepared to provide documentation listed above for the EIDL loan, too.
In addition, PPP loan program guidance requires that "All records relating to the Borrower's PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower's certifications as to the necessity of the loan request and its eligibility for a PPP loan, documentation necessary to support the Borrower's loan forgiveness application, and documentation demonstrating the Borrower's material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request."
Chelsea Groton Bank is in the process of establishing procedures for processing the more than 500 loans that we originated. We will send borrowers a formal instruction package which will include an electronic means of submitting completed applications. Please do not submit any information at this time. Additional instructions will be sent mid-June.
Download the pdf to the Interim Final Rule regarding the Loan Forgiveness Process: "As a general matter, the lender will review the application and make a decision regarding loan forgiveness. The lender has 60 days from receipt of a complete application to issue a decision to SBA. If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the statute and applicable regulations, the lender must request payment from SBA at the time the lender issues its decision to SBA. SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to SBA. If applicable, SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the Lender as required by section 1110(e)(6) of the CARES Act. If SBA determines in the course of its review that the borrower was ineligible for the PPP loan based on the provisions of the CARES Act, SBA rules or guidance available at the time of the borrower's loan application, or the terms of the borrower's PPP loan application (for example, because the borrower lacked an adequate basis for the certifications that it made in its PPP loan application), the loan will not be eligible for loan forgiveness. The lender is responsible for notifying the borrower of the forgiveness amount. If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the loan must be repaid by the borrower on or before the two-year maturity of the loan."
Other loan terms and conditions
- The PPP loan has a maturity of 2 years and an interest rate of 1%.
- SBA PPP Loan payments will be deferred for the first six months.
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
The Small Business Administration (SBA), along with the Treasury Department, is continuing to develop guidance on specific documents and calculations to use in determining their loan forgiveness amount under the PPP. Continue to check the Treasury's website for new Interim Final Rules, PPP Loan FAQs, and other information about the Paycheck Protection Program, such as Forgiveness and Economic Injury Disaster Loans.