Hi Peter,

I'd like to make the eligibility criteria clear to any prospective applicants:

• "The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll." (link)
• The boards and directors of the business have to sign in good faith that "Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant" (link)
• Providing misleading or incomplete information is a federal crime

This is an emergency support loan exclusively for businesses to retain workers they'd otherwise be forced to make redundant. At the moment, my interpretation of your summary is that you could make this point more prominent. At the moment, it's only included in the required documents section.

The wording 'make sure to mention that uncertainty of current economic conditions makes necessary the loan request' I think could be misinterpreted as leading people to exaggerate this factor, though I appreciate this may not be your intention.

I think it would be safer to say that 'this loan is exclusively available to businesses which are struggling to maintain their staff on the payroll and meet bill payments, and if this condition applies to your organisation, then please report this accurately in the documents you provide'.

Looks like the big banks have been pushing back about administering these loans: https://www.reuters.com/article/us-health-coronavirus-stimulus-banks-exc-idUSKBN21K075

https://www.politico.com/news/2020/04/02/banks-small-business-lending-program-launch-161106

As long as the number of full-time equivalent (FTE) employees at the end of this eight week period matches the number of FTE you had before (either calculated an average monthly FTEs during Feb-Jun 2019 or average monthly FTEs in Jan + Feb 2020), your loan will be forgiven. It can also be partially forgiven in proportion to your reduction in FTEs.

This phrasing is ambiguous as to what would happen to loan forgiveness if a firm increased the number of full-time employees during the loan period.

A friend's firm asked me about this so I poked into it a bit. Having done that, I'm ~80% sure that increasing headcount during the loan period wouldn't affect loan forgiveness.

From the statute text:

In General.—The amount of loan forgiveness under this section shall be reduced, but not increased, by multiplying the amount described in subsection (b) by the quotient obtained by dividing—

the average number of full-time equivalent employees per month employed by
the eligible recipient during the covered period; by

at the election of the borrower—

the average number of full-time equivalent employees per month employed by
the eligible recipient during the period beginning on February 15, 2019 and ending
on June 30, 2019; or

the average number of full-time equivalent employees per month employed by
the eligible recipient during the period beginning on January 1, 2020 and ending on
February 29, 2020; 

(Formatting isn't perfect because legal formatting doesn't play nice with EA Forum formatting.)

Fred Wilson points out the language of the act may prevent VC-backed startups from accessing the funds, because they are "affiliated" with organizations such that the total size of the affiliation is >500 employees: https://avc.com/2020/03/startups-and-sba-loans/

(This is because taking VC investment "affiliates" the startup with every other org the VC has funded.)

Has anyone looked into whether there might be an analogous concern for nonprofits who receive donations from foundations that have a lot of grantees, e.g. Open Phil?

CFAR's local bank sent out the following email to its clients a few minutes ago. I thought some of you might find it useful to know, especially the part where they claim no one will be getting these loans before next week.

Clients of Community Bank of the Bay,

The SBA issued its Interim Final Report on the Paycheck Protection Program (“PPP”) on Thursday evening at about 6:00 est.  Since then, we and other SBA Preferred Lenders have been reviewing the guidance, and have gotten clarity on some issues and found that others still remain undecided.  You may note that this information comes from the Interim Final Rule.     

What we have found is that all applications will be submitted digitally.  They will be completed directly by you the borrower through our bank’s portal once we provide you with secure access.  Along with the application, which is to be an SBA application (not a U.S. Treasury application) THAT HAS NOT YET BEEN FINALIZED, you will need to provide the following so that the Bank can verify payroll information and comply with applicable regulations.  Specifically, we must be able to do a number of certifications, including but not limited to the following:  

Bank must confirm that borrower was in business and incurred payroll costs on or about February 15, 2020.  (please gather your February 2020 payroll information)

Bank must confirm that the loan amount conforms with borrower’s average monthly payroll in the preceding calendar year. (please gather your 2019 payroll information). 

Conform with all applicable Bank Secrecy Act / Anti-Money Laundering and Beneficial Ownership regulations.  (This will already have been done for borrowing entities that are already clients.  If the borrowing entity is an affiliate of a CBB client, but does not have accounts here, we will need to focus on obtaining this information / documentation.) 

All in all the application process appears to be fairly simple.  The borrower completes the application, certifies to various items of status and provides information on line.  The Bank then approves the loan through its SBA Delegated Authority.  Because we are required to certify recent payrolls using prior calendar year information, my advice would be to not complicate the application by trying to include a lot of special circumstance employees.  For this program, simple equals speed to approval, documentation and receipt of funds. 

The loans will be for two years at an interest rate of 1.00% p.a. and SBA will defer all payments during the first six months.  Eight weeks after the loan is disbursed the borrower provides the Bank with documentation of how the funds were utilized and applies for loan forgiveness.  Per the Interim Final Rule, “ Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities.  Not more than 25% of the forgiven amount may be for non-payroll costs.”            

The issue now is of course that the official SBA application and associated on-line portal is not yet finalized.  Therefore we have not yet been able to post it to our website and test it.  It is the same for other banks.  Wells Fargo is stating on their website that they will not offer this loan until Monday at the earliest.  And regarding the application that I know others are telling you is official, Chase Bank literally says on their website, “Please do not send us U.S. Treasury applications”.  To my knowledge only Bank of America has made a portal available to their clients, but they specifically state that they won’t be processing any applications until mid-next week.      

I know this is frustrating, and I assure you it to us as well.  Community Bank of the Bay has been an active, SBA Preferred Lender for over ten years.  We are in direct contact with the SBA and their national servicer.  We assure you that we will keep you informed of the latest information on this Program, and as soon as it is available we will process your application in an efficient and timely manner.   

In the meantime, please gather the payroll information that I cited above.  If you are planning to apply through an entity that is not already a client of the Bank please contact your RM or branch to get started on opening the account.  If you would like to read the Interim Final Report, here is a copy that was distributed by a reputable third party - 

http://colemanreport.com/wp-content/uploads/2020/04/PPP-IFRN-FINAL.pdf

Thank you for your continued partnership with our Bank.