The Small Business Administration (SBA) has announced that the Paycheck Protection Program has been exhausted. Cathay Bank will not be accepting new Paycheck Protection Program loan applications.
Update on the second round of the Paycheck Protection Program
The Biden administration and the U.S. Small Business Administration (SBA) announced major changes to the Paycheck Protection Program on February 22. The main points are summarized as follows:
- From February 24 to Wednesday, March 9, Paycheck Protection Program loans are only available to small and micro businesses with fewer than 20 employees. The reason for this change is to allow the program to further benefit smaller businesses and businesses that have not benefited from previous relief measures. The current government hopes to use this to allocate resources to smaller businesses to help them continue to operate and resume production.
- Sole proprietors and independent contractors who file Schedule C on their tax returns will now receive the same treatment as self-employed farmers: Loans are determined on gross income (line 7) rather than net profit (line 31) upper limit. This type of business (including home repair contractors, groomers, and small independent retailers) accounts for the vast majority of all businesses. Of these businesses, 70 percent without employees are owned by women and people of color. However, many of these businesses are structurally excluded from the calculation of previous Paycheck Protection Program loans. This algorithmic revision is intended to benefit more of these types of businesses.
- Other announced changes include: removal of exclusions for business owners who are not convicted of a fraudulent felony; removal of exclusions for applicants delinquent on federally guaranteed student loans; and removal of legal U.S. residents for noncitizen business owners (green card and visa holders) restrictions.
Taking the above changes into consideration, we now recommend businesses with 19 or fewer employees to submit their applications immediately through the application link on our website.
For businesses with 20 or more employees, we recommend that you still submit your application to us. However, we cannot submit these applications to the SBA until March 10. But in the meantime, we strongly recommend that you still submit your application on our platform and have your documents ready so that on March 10th, the day it will be open to everyone again, we can submit it to the SBA’s platform immediately .
Paycheck Protection Program Loan Forgiveness Update
Please note that Cathay Bank is currently processing the first round of Paycheck Protection Program loan forgiveness applications in manageable batches. When your Paycheck Protection Program loan is selected for forgiveness, you will receive an email notification with a link to apply online. Rest assured, you have 10 months from the end of the loan coverage period (8 weeks or 24 weeks) to apply for loan forgiveness.
Highlights of the Paycheck Protection Program:
After months of tense negotiations, Congress announced a new $900 billion coronavirus relief package on December 21, 2020. Since then, the House and Senate have swiftly passed the new bill. President Trump signs new stimulus bill on December 27, 2020, which includes an injection of $284 billion for another round of the Paycheck Protection Program, and a new tiered simplified loan forgiveness program for $2 million Loans of $1 or less.
Here are our highlights based on currently limited information on the second round of the Paycheck Protection Program:
- The maximum loan amount is 2 million yuan (reduced from 10 million yuan)
- Maximum number of employees is 300 (reduced from 500)
- The loan amount is maintained at 2.5 times the average monthly salary cost unless:
- ——If the NAICS code of the enterprise starts with 72, that is, the accommodation and catering industry, the loan amount is calculated as 3.5 times the average monthly salary cost.
- Applicants will need to provide proof that their total income for any quarter of 2020 has decreased by at least 25% compared to the quarter of 2019.
- Applicants can apply for Paycheck Protection Program loans that cover from 8 weeks to 24 weeks, depending on their business interests.
- Paycheck Protection Program loans can be used to cover additional uses including operating expenses, property damage costs, supplier costs and employee protection expenses.
- Whether or not businesses applied for the first round of Paycheck Protection Program loan forgiveness, they can apply for the second round of Paycheck Protection Program loans. Businesses will not receive payments from the second Paycheck Protection Program loan until they have exhausted or expected to exhaust all funds from the first Paycheck Protection Program loan.
Please also note the following timeline for the addition of the new Act:
- Community financial institutions will accept the first batch of Paycheck Protection Program loan applications on Monday, January 11 and the second batch on Wednesday, January 13. Immediately thereafter, Paycheck Protection Program loans will be open to all participating lenders, including Cathay Bank. Cathay Bank will be accepting Paycheck Protection Program loan applications from Monday, January 11; applications will be submitted to the SBA for processing as soon as the platform allows.
- Paycheck Protection Program funding is available through March 31, 2021, or until funding is exhausted.
For the next round of Paycheck Protection Program funding applications, we are pleased to announce that we have improved and automated the loan process. For your convenience, all applications and required documents will be submitted online.
The new bill would also change the Paycheck Protection Program loan forgiveness process. Specifically, loan forgiveness applications will be tiered – simplifying the paperwork required for loans “under $150,000” and “$150,001 to $2 million” to varying degrees. Below is an overview of the expected changes in the new Act:
- A new simplified process will be introduced for all loans of less than $150,000 that have not been approved for forgiveness without requiring borrowers to provide documentation.
- Loans over $150,000 and less than $2 million will continue to require documentation, but the application process is expected to be simplified. Specific details are still pending.
- The Economic Injury Disaster Loan (EIDL) loan amount is no longer deducted from the forgiveness amount.
- — Once the SBA determines the process, any loan amount that has been deducted will be retroactively paid to the borrower. .
We provide Paycheck Protection Program loans to businesses located in states where Cathay Bank branches are located.
Please note that as we require payment account information, we will require applicants to provide a Cathay Bank business checking account before completing the application.