SBA PPP First Draw

These questions and answers are being provided as a convenience. The answers are based on our interpretation of the SBA rules, procedures and frequently asked questions. This information does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only. The information below may not constitute the most up-to-date legal or other information and Enterprise Bank & Trust may update this information without notice. You should contact your attorney to obtain advice with respect to any particular legal matter below. Enterprise Bank & Trust gives no warranty and accepts no responsibility or liability for the accuracy or the completeness of the information and materials contained below. All liability with respect to any action taken or not taken based on the content below are hereby expressly disclaimed.

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What is a First Draw PPP loan?

The PPP is a federal loan program that is designed to help small- and medium-sized businesses impacted by the coronavirus (COVID-19) to retain their workforce. It is available to qualifying borrowers who did not previously receive a PPP loan. One of this program’s significant features is you can apply for loan forgiveness after receiving the funds as long as the funds are used to fund payroll and other specific uses during the covered period. Forgiveness can be up to 100% of the loan and accrued interest. 

Am I eligible for this loan?

Small- and medium-sized businesses and nonprofit organizations that were in operation on or before February 15, 2020, with 500 or fewer full- or part-time employees (independent contractors can apply on their own and do not count toward the employee count) are generally eligible to apply for this loan. 

The types of entities that generally qualify are:

• Business entities (corporations, LLCs, partnerships)
• Sole proprietorships, independent contractors, self-employed individuals
• 501 (c) (3) entities
• 501 (c) (6) entities
• 501 (c) 19 Veterans Organizations
• Tribal Businesses
• Housing cooperatives
• Destination Marketing Organizations
• Eligible News Organizations

NOTE: Some of the above types of entities may not be eligible due to the types of activities they engage in, because of other characteristics, or because they fail affiliation rules. For more information consult the Economic Aid Act.

What can I use my funds for?

The permitted use of proceeds are: 1) payroll costs, 2) rent, 3) utilities, 4) interest on mortgages and 5) Interest payments on any other debt obligations incurred before February 15, 2020 plus the following:

• Refinancing an SBA EIDL loan made between January 31, 2020, and April 3, 2020, for purposes other than paying payroll costs and other eligible PPP expenditures.
• Covered operations expenditures (payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses).
• Covered supplier costs that are essential to the borrower’s operations made pursuant to a contract, order, or purchase order that was in effect before the covered period with respect to the applicable covered loan or, in the case of perishable goods, at any time before or during the covered period of the loan.
• Covered property damage costs (costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation).
• Covered worker protection expenditures including personal protective equipment and other costs needed for compliance with governmental guidance related to the COVID‐19 emergency beginning on March 1, 2020, and extending to the end of the national emergency declaration.

For individuals with income from self employment who file a Form 1040, Schedule C, you must have claimed or be entitled to claim a deduction for such expenses on your 2019 or 2020 (whichever you used to calculate loan amount) Form 1040 Schedule C for them to be a permissible use. 

To receive full loan forgiveness, a borrower must use at least 60 percent of the PPP loan for payroll costs, and not more than 40 percent of the loan forgiveness amount may be attributable to non payroll costs. Forgiveness will be reduced proportionally if payroll does not meet the 60% threshold.

How long do I have to spend the loan proceeds?

The ‘‘loan forgiveness covered period’’ is the period beginning on the date the lender disburses the PPP loan and ending on any date selected by the borrower that occurs during the period (i) beginning on the date that is 8 weeks after the date of disbursement and (ii) ending on the date that is 24 weeks after the date of disbursement.

What is the maximum loan amount for a First Draw loan?

For most borrowers, the maximum loan amount of a Second Draw loan is 2.5x average monthly 2019 or 2020 payroll costs up to $10 million. 

How do I apply for a First Draw loan?

You can read instructions and get a link to the First Draw application by visiting our SBA PPP Application Process page.  

What is the deadline for submitting a First Draw loan application to Enterprise?

PPP has been extended to March 31, 2021. This is the last date on which a PPP loan application can be submitted to and approved by the SBA. To provide adequate processing time, we will stop accepting applications on March 19, 2021. Receipt of an application by March 19 does not guarantee that a PPP loan will be processed by Enterprise and approved by the SBA by the March 31 deadline. 

What supporting documents do I need to provide with the First Draw loan application?

• Borrowers must submit such documentation as is necessary to establish eligibility such as payroll records, payroll tax filings, or Form 1099–MISC, Schedule C or F, income and expenses from a sole proprietorship, or bank records. 
• For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount. 

Borrowers who are new to Enterprise must provide corporate organizational documents. Our Information Summary provides more information about supporting documentation requirements.

If I do not have an Enterprise checking or savings account, will I need to open one if I am approved for an SBA PPP loan?

Yes, an Enterprise checking or savings account will be required to close and fund the loan.

Is the borrower demographic information on the First Draw application required?

No, the disclosure of this information is optional and voluntary and will have no bearing on the loan decision. The SBA encourages all borrowers to complete the information. 

When do I have to start making principal and interest payments on my First Draw loan?

If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, or if SBA determines that the loan is not eligible for forgiveness (in whole or in part), the Second Draw loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, the lender must notify the borrower of the amount and date the first payment is due.

Borrowers may repay their PPP loan at any time without a prepayment penalty.  You will be charged accrued interest on the PPP loan for any time it was outstanding.  

When will I receive funding if I submitted an application?

Enterprise is working to approve your loan and disburse funds as fast as possible. Due to high volume, we are unable to provide you with an exact time. Your loan will be funded within 10 calendar days from SBA approval, as long as we receive signed and completed paperwork from you in a timely manner. If we do not receive paperwork back in a timely manner, the SBA requires your loan application be canceled if not funded within 20 calendar days.

I submitted my application and didn’t hear back. When will I hear something?

You will hear from Enterprise as soon as the SBA accepts your loan application.

I submitted my application and want to change the amount prior to funding. What should I do?

Please contact your Relationship or Portfolio Manager to discuss any necessary changes prior to funding your loan.

I received my PPP funds and want to change the amount. What should I do?

No changes are permitted after your PPP loan has been funded.

I have received the loan document. Where is information about loan forgiveness?

You can reference Section 304(b) of the Economic Aid Act which discusses loan forgiveness, and thus which makes the Note subject to that legislation.  As clarification, Section 1106 of the CARES Act (15 U.S.C. 9005) was redesignated as section 7A, transferred to the Small Business Act (15 U.S.C. 631 et seq.), and inserted so as to appear after section 7 of the Small Business Act (15 U.S.C. 636) in section 304(b) of the Economic Aid Act.

What size loans will the SBA review?

The SBA may review any PPP loan of any size at any time at its discretion. If SBA undertakes such a review, SBA will notify the Lender and the Lender must notify the borrower in writing within five business days of receipt of notification. The SBA may also request additional information directly from the borrower. 

What are the records retention requirements for the PPP program?

Borrowers that receive a loan of $150,000 or less must retain records that prove compliance with the PPP requirements—with respect to employment records, for the 4-year period following submission of the loan forgiveness application, and with respect to other records, for the 3-year period following submission of the loan forgiveness application. 

All other borrowers are required to retain PPP loan supporting documents for a period of six years after the date that the loan is forgiven or repaid in full. Such information includes payroll documentation, documentation supporting the borrower’s certifications, documentation delivered in connection with, and in support of, the borrower’s loan forgiveness application, and any other records demonstrating material compliance with PPP requirements. 

SBA may review and audit PPP loans of $150,000 or less and access any records the borrower is required to retain. All borrowers with loans of any size must provide documentation independently to a lender to satisfy relevant Federal, State, local or other statutory or regulatory requirements or in connection with an SBA loan review.

Questions about PPP records retention should be directed to your legal counsel, financial advisor or accountant for assistance.

Where can I get more information on the PPP forgiveness process and rules?

A link to the SBA FAQ’s on loan forgiveness is here.

Does Enterprise pay agents or agent fees?

Enterprise may pay agent fees if the agency is disclosed at the time the loan application is submitted and the parties reach a contractual agreement for fees that are consistent with SBA requirements.

Are there any other products available as part of the relief package that could positively impact (forgiveness, cover payments, etc.) my business loan with Enterprise?

Yes.You can discuss options with your Relationship or Portfolio Manager.

Who can help answer my question if it’s not on the website?

Due to the overwhelming number of questions, we are asking borrowers to discuss questions with their legal counsel, financial advisor or accountant for assistance. Ultimately, the accuracy of the calculation is the responsibility of the applicant. For more information on the program, you can review the SBA website at SBA.gov.