CARES Act: Paycheck Protection Program
Update for Business Customers

Updated 7/4/2020

As part of the federal stimulus measures to address the COVID-19 pandemic, the Coronavirus Aid, Relief, and Security Act (CARES Act) was signed into law on March 27, 2020. A key piece of this legislation is the Paycheck Protection Program (PPP). This program authorizes government funding for low-interest, forgivable loans for small businesses and nonprofits to encourage them to retain or rehire their employees.

Through the Paycheck Protection Program Flexibility Act, the PPP has been amended to provide more flexibility for businesses and to make it easier to qualify for loan forgiveness. Additionally, while the program was slated to end on June 30, Congress extended the application period by five weeks to give businesses more time to apply.

Current Customers Only

A Bank of the Sierra PPP loan applicant must be a current Bank of the Sierra customer with a business banking relationship that started on or before March 31, 2020. To apply for a PPP loan at Bank of the Sierra, you must submit your application no later than August 7, 2020.

On June 5, 2020, the Paycheck Protection Program Flexibility Act was signed into law. This legislation amends many aspects of the PPP to provide more flexibility for borrowers and to make it easier to qualify for loan forgiveness. Here are some of the key updates to the program:

  • The loan term was changed from two years to five for PPP loans made on or after June 5, 2020. Borrowers who received their loan before this date have the option to extend their loan from two to five years with the lender’s approval.
  • Loan deferment has been extended from 6 months to the date that your amount of loan forgiveness is determined or 10 months after the last day of the covered period if you do not apply for loan forgiveness within that time. (Note: interest will accrue during the deferment period.)
  • The covered period during which PPP funds used for eligible expenses can qualify for forgiveness has been expanded from eight weeks to 24 weeks. However, borrowers that received their PPP loan prior to enactment of the Paycheck Protection Program Flexibility Act still have the option to use the previous eight-week covered period.
  • The 75% payroll requirement has been lowered to 60%.
  • Businesses now have until December 31, 2020, to return to full employment in order to qualify for loan forgiveness. However, borrowers who received their PPP loan prior to the Paycheck Protection Program Flexibility Act have the option to continue to use the initial June 30 deadline to meet this requirement.
  • Under the CARES Act, a business with a PPP loan could defer payments of the employer’s share of 2020 Social Security taxes until they are granted forgiveness of their PPP loan. This has been amended to allow businesses that receive PPP loan forgiveness to continue delaying payment of these taxes. Please speak with your tax advisor for additional guidance.

One of the most notable features of PPP loans is that all, or some, of the loan amount will be forgiven if:

  • The funds are used within 24 weeks of the day you receive the funds. Borrowers that received their PPP loan prior to enactment of the Paycheck Protection Program Flexibility Act still have the option to use the previous eight-week covered period.
  • The funds are used for approved purposes including:
    • Payroll costs, including salaries, wages, tips, commission, etc. up to $100,000 annualized per employee whose principal residence is in the U.S.
    • Employer-paid state and local payroll taxes (not federal employment taxes)
    • Employer-paid vacation, parental, family, medical, or sick leave except for payments for which a credit is allowed under the Families First Coronavirus Response Act (FFCRA)
    • Severance
    • Employer-paid group health insurance premiums
    • Employer-paid retirement benefits
    • Rent and lease agreements that originated before Feb. 15, 2020
    • Mortgage interest (not principal payments or prepayments) that were in force before Feb. 15, 2020
    • Utilities, including electricity, gas, water, transportation, telephone, and internet for services that began before Feb. 15, 2020
  • No more than 40% of the loan forgiveness request is for non-payroll costs. (To be eligible for full loan forgiveness, borrowers must use no more than 40% of the total loan amount for non-payroll costs).
  • You restore your FTE employment level by December 31, 2020 (or by June 30, if using the initial eight-week covered period). An exemption is available for borrowers that could not return to full business activity due to compliance with government safety regulations.
  • You restore salaries or hourly wages for each employee making up to $100,000 annualized by December 31, 2020 (or by June 30, if using the initial eight-week covered period).

Please Note: If your PPP loan was used to refinance an SBA EIDL, any advance up to $10,000 will be deducted from your PPP loan forgiveness.

Note that we are not currently accepting Forgiveness Applications; however, we will have a user-friendly, online application available for you to complete, so you do not need to fill out an application on the SBA’s website. We will provide more information and a link to apply for PPP Loan Forgiveness in the weeks ahead.

PPP loans are offered by the Small Business Administration (SBA) through SBA-approved lenders, like Bank of the Sierra. Features include:

  • Available to all businesses, nonprofits, veterans organizations, tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors with 500 employees or fewer as well as certain types of larger multi-site businesses that meet certain criteria.
  • No collateral and no personal guarantee are required.
  • Loans are up to 2.5x a business's average monthly payroll costs from 2019, up to a maximum of $10 million.
  • There are no fees.
  • The term is for 5 years with a 1% fixed interest rate. (Note: PPP loans issued before June 5 have a 2-year term; borrowers with a 2-year term may contact their business banker to see if they are eligible to switch to the 5-year term.)
  • Loan payments are deferred until your amount of loan forgiveness is determined or until 10 months from the date that your covered period ends, if you do not apply for loan forgiveness (interest will accrue during this time).
  • There is no prepayment penalty.

Small businesses that receive funds through the program can use them to pay for the items listed below:

  • Payroll costs, including salaries, wages, tips, commission, etc. up to $100,000 annualized per employee whose principal residence is in the U.S.
  • Employer-paid state and local payroll taxes (not federal employment taxes)
  • Employer-paid vacation, parental, family, medical, or sick leave except for payments for which a credit is allowed under the Families First Coronavirus Response Act (FFCRA)
  • Severance
  • Employer-paid group health insurance premiums
  • Employer-paid retirement benefits
  • Rent and lease agreements that originated before Feb. 15, 2020
  • Mortgage interest (not principal payments or prepayments) that were in force before Feb. 15, 2020
  • Utilities, including electricity, gas, water, transportation, telephone, and internet for services that began before Feb. 15, 2020
  • Refinancing an SBA EIDL loan made between Jan. 31, 2020, and April 3, 2020

Small businesses can receive 2.5x the average of their monthly payroll costs from Jan. 1, 2019, through Dec. 31, 2019. If your business is seasonal, you have the option to choose the time period of Feb. 15, 2019, to June 30, 2019, instead. And, if your business is new, you can choose the time period of Jan. 1, 2020, to Feb. 15, 2020. These items can be included in your calculation:

  • Salaries, wages, commissions, and tips up to $100,000 per employee on an annual basis
  • Employer-paid vacation pay and parental, family, medical, and sick leave not credited through FFCRA
  • Severance
  • Employer payments for group medical insurance benefits (i.e., premiums)
  • Employer payments for retirement benefits
  • Employer-paid state and local payroll taxes

If you have any employees whose principal residence is outside of the U.S., their compensation must be excluded.

If you are applying for a PPP loan, the required business documents can be found in our online application. If you are preparing to apply for loan forgiveness, please note that we are not currently accepting Forgiveness Applications; however, we will have a user-friendly, online application for you to complete, so you do not need to fill out an application on the SBA’s website. We will provide more information and a link to apply for PPP Loan Forgiveness in the weeks ahead.

You can learn more about the PPP by visiting SBA’s Paycheck Protection Program webpage.

Apply Online

To apply for a PPP loan at Bank of the Sierra, you must submit your application by August 7, 2020. PPP loan applicants must be current Bank of the Sierra customers with a business banking relationship that started on or before March 31, 2020. An authorized representative of your organization can apply online by clicking the button below. Please be prepared to upload required documentation as a part of the application process.

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Loan Forgiveness Application Coming Soon

If you are preparing to apply for PPP loan forgiveness, please note that we are not currently accepting Forgiveness Applications. We will have a user-friendly, online application for you to complete, so you do not need to fill out an application on the SBA’s website. We will provide additional details when our loan forgiveness application becomes available.

Important Disclaimer: Bank of the Sierra wants to support our business customers by providing information and reminders about the Paycheck Protection Program (PPP), which are based on guidance from the Small Business Administration (SBA). Please note that the information we provide is for informational purposes only. We are not guaranteeing its accuracy. We are not endorsing the program nor providing business, legal, or tax advice. There are still uncertainties about the program, and the SBA is expected to release additional guidance. Current information can be found on the SBA’s Paycheck Protection Program webpage.