Paycheck Protection Program for Employers

Nusenda Federal Credit Union ("Nusenda") is participating in the U.S. Small Business Administration’s ("SBA") Paycheck Protection Loan program authorized under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Acts. This document is based solely on Nusenda’s review of the CARES Act, the Paycheck Protection Program Flexibility Act of 2020 ("PPPFA"), the Interim Final Rules from the SBA, and guidance from the Department of Treasury* as of June 5, 2020, and is intended to aid prospective Borrowers in determining eligibility, loan amount, and preparing documentation necessary to apply. This summary is not intended to contain all terms and eligibility requirements of the program, and is not a commitment to make any loan by Nusenda. Given the changing nature of the guidance and Nusenda’s limited time to review new guidance as it is published, Nusenda makes no guarantee that this document is error-free. This document does not constitute legal advice, and you should consult your own attorney regarding any such advice.


All terms, conditions, and eligibility remain subject to change based on any additional guidance or regulation issued by the U.S. Small Business Administration ("SBA") and the U.S. Department of the Treasury.

* Visit the U.S. Department of the Treasury and U.S. Small Business Administration for more information on SBA’s assistance to small businesses.


Eligibility and Loan Amount

Eligibility

  • Business or Nonprofit that has 500 employees* or less; or businesses classified under the North American Industry Classification System ("NAICS") code ‘72 — Accommodation and Food Services' and operating multiple locations, that have no more than 500 employees per physical location; and
  • Business was in operation on or before Feb. 15, 2020.

* Employees include all individuals employed on a full-time, part-time, or other basis.

Eligible Loan Amount (not to exceed $10,000,000)

Equal to the sum of:

  • 2.50 x [average monthly Payroll Cost**]
  • Plus: 2.50 x [average monthly Self-Employment Earnings not to exceed $8,333 monthly or $100,000 annually:
    • For businesses filing a Form 1040 Schedule C, use Line 31 to determine the annual amount.
    • For Partnerships filing a Form 1065, use Box 14.a of Form 1065 Schedule K-1 (reduced by any section 179 expense deductions, unreimbursed partnership expense claimed, and depletion claimed on oil and gas properties) multiplied by 0.9253 to determine the annual amount].
  • Plus: Outstanding balance on any SBA EIDL Loans (granted between Jan. 31, 2020 and Apr. 3, 2020) that you elect to refinance at the time of your Paycheck Protection loan funding.

** Refer to ‘Payroll Cost Definition’ section herein for eligible costs. Average monthly Payroll Costs is generally based on the monthly average of this expense for 2019; or for seasonal employers (as determined by the SBA) the monthly average of this expense for the period of Feb. 15 – June 30, annualized for each employee.


Allowable Uses

Loan proceeds of the loan may be used for any of the following expenses during the 24 week Covered Period which commences after the initial loan disbursement:

  • Payroll Costs (as defined in the ‘Payroll Cost Definition’ section herein).
  • Owner’s Compensation Replacement as calculated based on Self-Employment Earnings in the Eligible Loan Amount section above. Note that only 2.5 months of this amount (up to $20,833) is eligible for forgiveness. This may not be increased for company-paid benefits to the owners or partners.
  • Interest expense on debts incurred prior to Feb. 15, 2020.
  • Rent expense on leases in effect prior to Feb. 15, 2020.
  • Utility expenses for services beginning prior to Feb. 15, 2020.

At least 60% of loan proceeds must be used for Payroll Costs and no more than 40% should be used for Non-Payroll Cost. Borrowers must maintain records of all expenses for the Forgiveness Application.


Loan Terms

Below are the loan terms for PPP Loans:


Term Guidance

Loan Amount:

Eligible Loan Amount as defined above.

Interest Rate:

1.00% Fixed

Loans may be repaid at any time without prepayment penalty.

Fees:

N/A

Term:

60 months from date of Note.

Payments:

All amounts due for principal or interest shall be deferred until the amount of forgiveness has been determined and payment for the forgivable portion of the loan is remitted to Nusenda by the SBA. In no event shall payment deferrals exceed 20 months.


Notwithstanding the provision above, If Borrower does not submit a Loan Forgiveness Application within 10 months after the end of the covered period (approximately 15 months after the loan is disbursed), the entire loan balance will be deemed ineligible for forgiveness, and principal and interest payments shall commence on the sixteenth (16th) month after the note date.


Interest shall accrue during the deferred period, but shall not be capitalized. The SBA shall pay all accrued interest on the forgivable portion of the loan, and the Borrower shall be responsible for the payment of accrued interest on the portion of the loan that is not eligible for forgiveness.


Any balance that is not eligible for forgiveness shall be fully amortized and repaid in monthly installments of principal and interest based on the remaining term of the loan. Payments shall be established in such amount to amortize the accrued interest owed by Borrower from the deferral period.

Guarantees:

SBA does not require recourse unless funds are misappropriated.

Collateral:

Unsecured



Applications Materials

Nusenda will require the following documentation to begin considering your application; however, as noted, additional information may be required based on additional guidance or regulation from the SBA.

  • Most recent filed federal tax return (if you have never filed a return for your business, EIN Certification Letter from the IRS).
  • If you intend to claim Self-Employment Earnings you must provide Form 1040 Schedule C for 2019 or Form 1065 Schedule K-1 for 2019.
  • Organizational documents, such as Articles of Incorporation or Organization filed with the State of New Mexico.
  • Corporate Bylaws, Operating Agreement, or General or Limited Partnership Agreement.
  • 2019 Financial Statements (Including detail of other Payroll Costs used in calculating Eligible Loan Amount).
  • 941 Payroll Tax Filing for Q1, Q2, Q3, and Q4 of 2019 and for Q1 of 2020.
  • Schedule of employees earning over $100,000 on an annualized basis (include actual salary and wages for each employee and days worked in 2019).

For each individual owning more than 20%:

  • Copy of Driver’s License or Passport.
  • Social Security Number and Physical Address must be included on the application.

Debt Forgiveness

100% of the loan proceeds may be eligible for debt forgiveness by the SBA provided funds are used for Allowable Uses subject to restrictions on Self-Employment Earnings. Application for forgiveness will be processed after the loan proceeds are used and will require records of the expenses. Forgiveness is prohibited without adequate records of the use of funds.


Please visit our page on Loan Forgiveness Application for additional information.


Representations and Warranties

The SBA will require the Borrower to make the following representations writing on your application:

At Loan Application:

  • Certification that the uncertainty of the current economic conditions make the request for the Paycheck Protection Loan necessary to support ongoing operations.
  • Acknowledgement that the funds will be used to retain workers and maintain payroll, or pay other allowable expenses.
  • Attestation that another, duplicative loan application is not pending, and the Borrower has not received proceeds from another Paycheck Protection loan for duplicative purposes.

At Application for Debt Forgiveness:

  • Certification that the supporting documentation regarding use of funds is true and correct.
  • Certification that the amount of forgiveness requested was used to retain employees and/or pay other allowable expenses.

Payroll Cost Definition

Sum of payments of any compensation with respect to employees that is a:

  • Salary, wage, commission, or similar compensation.
  • Payment of cash tip or 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 leave.
  • Allowance for dismissal or separation.
  • Payment required for the provision of group health care benefits, including insurance premiums.
  • Payment of any retirement benefit.
  • Payment of state or local tax assessed on the compensation of employees.

Exclusions:

  • The compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period.
  • Federal employment taxes imposed or withheld, 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 employees.
  • Any compensation of an employee whose principal place of residence is outside of the United States; and
  • Qualified sick and family leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116– 127).