Virginia National Bankshares : PPP Round 3 Information

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January 08, 2021

PPP Round 3 Information

Updated January 7th, 2021

New economic relief legislation was signed into law on December 27th, which includes additional Paycheck Protection Program (PPP) funding to help small businesses hard-hit by COVID-19.

Virginia National Bank will be participating in this new round of PPP funding (referred to as 'Round 3'). The official start date is yet to be determined.

*Please note: VNB will be processing PPP Round 3 applications only for current customers, as defined by those who:

• Have an active deposit account as of 12/31/2020, and/or
• Have an active non-PPP loan with VNB.

We are awaiting the final rules and guidelines from the Small Business Administration (SBA) regarding the additional PPP funding that was approved on December 27th to help small businesses hard-hit by COVID-19. In the meantime, we want to provide our customers a summary of what we know thus far, as well as our expectations. We are committed to keep you updated, so please check back to this site often.

For this round of funding, we will be accepting PPP loan applications using a new online portal that will expedite the application process. The portal will be available soon, and we will direct all customers to the page when it is available.

*All of the following information is based on the best available data at the time of publishing. All information included herein is subject to further SBA guidelines, clarification, and related changes. We recommend reviewing the Interim Final Rules (IFRs) recently published by the US Department of the Treasury (links provided below for your convenience):

IFR 1 - Amendments to the PPP program
IFR 2 - Second Draw Loans

Summary of what we know so far:

First and Second Draw PPP Loans

• If you have not previously taken a PPP loan:
  You will be able to apply for a PPP loan using PPP loan criteria and terms from previous funding rounds (e.g. up to 500 employees, loans amounts up to $10 million).
  
• If you have received a PPP loan in Round 1 or Round 2 and are applying for a second PPP loan:
  'Second draw' PPP loans, as they are known, have new eligibility requirements intended to assist smaller businesses that were hard hit by COVID restrictions. Generally, the requirements are as follows:
  • Business has 300 employees or fewer
  • Business experienced at least a 25% reduction in gross revenue in any quarter in 2020 compared to that same quarter in 2019, or at least a 25% reduction in annual gross revenue in 2020 compared to annual revenue in 2019.
  • Loan amounts are equal to 2.5 times monthly payroll up to $2 million. Certain industries, such as hotels and restaurants (or all NAICS codes starting with 72), can request loan amounts equal to 3.5 times monthly payroll up to $2 million.

Documents and materials needed to apply:

• Application for loans less than or equal to $150,000:
  • Documents substantiating a reduction in gross revenues of greater than 25% in either:
    • Any quarter of 2020 relative to that same quarter in 201
    • Total 2020 revenue relative to 2019 revenue
    • (see IFR for rules relating to business that were not in operation in 2019)
  • No other documentation is needed at the time of application, but the borrower will be required to provide payroll documentation (similar to rounds 1 and 2 of PPP) at the time of forgiveness.
    
• Application for loans greater than $150,000:
  • Documents substantiating a reduction in gross revenues of greater than 25% in either:
    • Any quarter of 2020 relative to that same quarter in 2019
    • Total 2020 revenue relative to 2019 revenue
    • (see IFR 2 linked above for rules relating to business that were not in operation in 2019)
  • Payroll documentation and proof of taxes paid (or filed)
    • Quarterly 941 forms are best
    • Borrower may opt to use 2019 data or 2020 data

*Please note that if VNB already has these documents (e.g., the customer wishes to use 2019 data and has already provided those documents to VNB for either Round 1 or 2 of PPP), they need not re-submit these documents. However, all borrowers must submit evidence of the revenue reduction noted above.

Although borrowers may not yet submit an application, we recommend collecting your documentation ahead of time in order to expedite the process.

Eligible expenditures of PPP loan funds

Eligible expenses continue to be 60% payroll costs and 40% non-payroll costs. However, eligible non-payroll expenses have been expanded to now include certain business software or cloud computing services, certain uninsured property damage costs from public disturbances during 2020, certain supplier costs, and certain worker protection expenditures (please see page 49 of IFR 1 linked above).

Clarification of PPP tax treatment

The law includes clarification regarding taxes and eligible expenses and forgiveness. We recommend that you contact your tax adviser or accountant for more details.

Update to Economic Injury Disaster Loan (EIDL) Advance Reduction

According to prior legislation, the forgiveness amount of a PPP loan was required to be reduced by the amount of any EIDL advance received (for those borrowers that received funding from both sources).

The current legislation signed on December 27th has repealed this reduction.

If you have already completed forgiveness of your PPP loan, the law states you must be retroactively made whole. If you are a Virginia National Bank PPP customer in this situation, we will be in contact with you once we know more.

Updates to Forgiveness of Existing PPP Loans:

• PPP loan amounts of $150,000 or less:
  The new law calls for a streamlined loan forgiveness application that is limited to a one-page certification form that does not require documentation be submitted with your application. We will notify customers once this form is available.
• PPP loan amounts of more than $150,000:
  There are no significant forgiveness changes included in the new law, except for the inclusion of additional non-payroll costs for which PPP funds may be used.

What we expect to know soon:

Date applications will be accepted:

We will be accepting PPP applications for Round 3 in January, but we do not have a specific date yet. The SBA has until January 13 to share the complete rules regarding PPP funding requests, but we believe that the entire process may begin as early as Monday, January 11th. Please do not try to submit an application until VNB has notified you that we have opened the portal.

How long will the funds last?

We are unable to predict how quickly the funds may be exhausted. However, we do expect demand to be high. We know that, per the law, the PPP program will end on March 31st, 2021 and all loan applications must be approved by the SBA on this date, if funds remain.

How quickly will my loan be funded after I apply?

We expect the SBA to include loan funding timing and guidelines in the final rules. We have been told that approval of the loan will not be immediate, as it was in the first two rounds, however the exact timeline remains to be seen.

We understand that PPP loans are a vital lifeline to businesses during the pandemic. We are committed to keeping you informed, and we will update this page regularly.