The U.S. Small Business Administration (SBA) has released updated guidance relating to businesses certifying eligibility for a PPP loan.

The guidance is referred to in Question 31 of the SBA's Frequently Asked Questions (also posted below).

During the application process, you certified that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant."

The SBA is asking applicants who are in the process of or have received PPP funds to revisit the criteria.

If you reconsider your certification of need for the loan(s), the SBA is providing the opportunity to repay the proceeds in full by May 7, 2020, in good faith.

If would like to arrange a repayment of your PPP loan(s), please contact your Relationship Manager or call an M&T representative at 1-800-724-2240.

We recommend that you read the entire Question 31 answer below and consult your legal counsel if necessary.

Do businesses owned by large companies with adequate sources of liquidity to support the business's ongoing operations qualify for a PPP loan?
In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.

Lenders may rely on a borrower's certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

What are the terms for the PPP loan?

Below are the terms for the PPP loan.

For borrowers that received their PPP funds before June 5, 2020:

• Term: 2 years *Term may be extended to 5 years upon borrower and lender agreement.
• Interest Rate: 1%

For borrowers that received their PPP fund on or after June 5, 2020:

• Term: 5 years
• Interest Rate 1%

Payment deferral period has been extended from 6 months, to the date on which your eligible forgiveness amount is remitted to the lender. For borrowers who do not apply for forgiveness within 10 months after the end of the covered period, the deferral period will end at that time as well

When and how do I apply?

As of Aug. 31, we are currently testing our loan forgiveness portal. This step enables us to provide a smooth application process. You will receive advance communication as soon as M&T's loan forgiveness application portal is available.

How long do I have to allocate the funds received from the loan disbursement?

The PPP Flexibility Act lengthens the forgiveness "covered period" from an 8-week period (56 days) to a 24-week period (168 days), but not later than December 31, 2020. Borrowers with loans prior to June 5 maintain the option to use the original 8-week period.

Which Covered Period is right for me, 8 or 24 weeks?

A borrower should choose a covered period that will allow all eligible payroll and non-payroll expenses to be paid out prior to applying for loan forgiveness. The covered period begins on the day the PPP funds were deposited into your account and run through 8 weeks or 24 weeks. The covered period chosen needs to align with payroll and non-payroll expense disbursement, payment and documentation.

Example: PPP funds were exhausted during Week 9. The chosen covered period for the PPP loan forgiveness application would be the 24-week covered period.

What is the Alternative Payroll Covered Period, and do I need it?

For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 8-week (56-day) or 24-week (168 days) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the "Alternative Payroll Covered Period").

Example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

What happens to the portion of my PPP loan that isn't forgiven?

For any amount not forgiven, the original terms in the promissory note will apply (1% APR for 24-month term). A payment recalculation of the unforgiven portion will be conducted for balanced principal and interest payments (P&I) over the remaining term of the loan. The PPP Flexibility Act extends the PPP loan payment deferral period from 6 months, to the date on which your eligible forgiveness amount is remitted to the lender. For borrowers who do not apply for forgiveness within 10 months after the end of the covered period, the deferral period will end at that time as well.

What documents are needed for Payroll Expenses?

• Bank account statements or third-party payroll service provider reports documenting cash compensation paid to employees
• Tax forms or equivalent third-party payroll service provider reports for: payroll tax filings and state quarterly wage reporting and unemployment insurance tax filings
• Payment receipts, cancelled checks, or account statements documenting employee health insurance and retirement plan contributions
• FTE Documentation: any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule; documentation showing average number of FTE employees

What documents are needed for Non-Payroll Expenses?

• Business mortgage interest payments:
  • Amortization schedule and cancelled checks OR
  • Bank statements from February 2020 and covered 8- or 24-week period
• Business rent and lease payments:
  • Copy of current lease and receipts OR
  • Cancelled checks or bank statements from February 2020 and covered 8- or 24-week period
• Business utility payments:
  • Copy of invoices from February 2020 and those paid during the covered 8- or 24-week period AND
  • Receipts, cancelled checks, or account statements

What costs are eligible to be forgiven?

The PPP Flexibility Act revised the payroll requirement to 60% usage for payroll costs (Payroll expenses, including health and retirement benefits, and payment of state and local taxes.) Note: Owner-employees and self-employed individual payroll compensation capped at lesser of 8/52 of 2019 compensation levels or $15,385 for the 8-week covered period or (2.5/12) of 2019 net profit up to $20,833 for the 24-week covered period per individual in total across all Businesses, and does not include health benefits or retirement plan contributions. 40% usage for other eligible business expenses (Interest on business mortgage obligations, rent/leases, and utilities). Note: mortgage loans, utilities, rent and lease agreements had to be in effect before February 15, 2020.

Is interest on non-mortgage debt a forgivable expense, such as term debt, Line of Credit (LOC) or Credit Card (CC) debt?

No, the only interest payments that can be forgiven is on a business mortgage obligation on real or personal property that was incurred before February 15, 2020. A loan secured by movable personal property is a chattel mortgage (as opposed to a conventional mortgage).

Is an Economic Injury Disaster Loan (EIDL) eligible for loan forgiveness?

No, the SBA will deduct EIDL advance amounts from the loan forgiveness amount.

Are bonuses/ hazard pay permitted?

If an employee's total compensation does not exceed $100,000 on an annualized basis, the employee's hazard pay and bonuses are eligible for loan forgiveness because they constitute a supplement to salary or wages, and are compensation. As a reminder for the self-employed and partners, it cannot exceed 8/52 or (2.5/12) of 2019 net profits.

What happens if I use funding from the PPP for non-eligible expenses?

Per SBA guidance, if you use PPP funds for unauthorized purposes, the SBA will direct you to repay those amounts. If you, one of your shareholders, members, or partners knowingly uses PPP funds for unauthorized purposes, the SBA will very likely take recourse, which could include charges for fraud. Please consult tax, legal or accounting advisors for professional advice.

What is the maximum amount of loan forgiveness that can be requested for the payroll compensation of owner-employees and self-employed individuals?

Compensation for 8-week covered period is capped at lesser of 8/52 of 2019 net profits or $15,385 per individual in total across all businesses.

Compensation for 24-week covered period is (2.5/12) months' worth of 2019 net profit up to $20,833 per individual in total across all businesses. Excluding any qualified sick leave amount for which a credit is claimed under the Families First Coronavirus Response Act (Section 7002 or 7004)

What will a reduction in employees' salary or wages have on the loan forgiveness amount?

A reduction in an employee's salary or wages in excess of 25% will generally result in a reduction in the loan forgiveness amount unless an exception applies. For each new employee in 2020 and each existing employee who was not paid more than the annualized equivalent of $100,000 in any pay period in 2019, the borrower must reduce the total forgiveness amount by the total dollar amount of the salary or wage reductions that are in excess of 25% of base salary or wages between January 1, 2020 and March 31, 2020. This is subject to exceptions for borrowers who restore reduced wages or salaries. This reduction calculation is performed on a per employee basis, not in the aggregate.

What do I do with employees that refuse to come back to work?

If a return to work offer at the same salary/wages/hour was rejected by an employee, the borrower must maintain records documenting the written offer and its rejection and inform the applicable state unemployment insurance office of such employee's rejected offer of reemployment within 30 days of the employee's rejection of the offer. The SBA will be posting state unemployment offices on the SBA website.

Can I rehire employees that were laid off or put on furlough?

Yes