Paycheck Protection Program Summary and QA for SBA

Paycheck Protection Program Summary and Q&A for SBA Paycheck Protection Program

Our Understanding As part of the March 27, 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act The United States Small Business Association (SBA) is offering low-interest disaster loans to decrease the economic impact of the COVID-19 pandemic on small businesses under the Paycheck Protection Program (PPP). Key Features of the PPP Loans: While SBA has not issued final implementation guidance, which is due 15 days from bill signing, there are some portions of the program that are defined. The intent of the program it to provide funding primarily for payroll purposes, there a range of allowable usages, including mortgage interest and lease payments as well as debt service payments on pre-existing debt, and other bills including insurance and utilities. Treasury has set aside $350 Billion to support this program. This is likely to run out quickly and it is unclear if additional funds will be allocated in the future. Eligibility during the covered period (defined as until June 30, 2020) has expanded to virtually all small businesses with under 500 employees including sole proprietorships, independent contractors and Covered period for the issuance of the loans is until June 30, 2020 Maximum Interest rate of 4% Maximum loan amounts are calculated based on existing monthly payroll capped at $100, 000 per employee January 20, 2022 Copyright, Richey May and Company, LLP, 2020 2

Our Understanding Key Features of the PPP Loans Continued: Prepayment penalties, guaranty fees and annual fees associated with standard 7(a) program have been waived as part of PPP Maximum loan amounts are calculated based on existing monthly payroll capped at $100, 000 per employee times 2. 5 or $10 million, which ever is less. For example: Business with Owner and 4 employees Employee Annual Salary Owner $200, 000 Salary for Calculation $100, 000 Employee 1 $150, 000 $100, 000 Employee 2 $75, 000 Employee 3 $60, 000 Employee 4 $25, 000 Totals $360, 000 Maximum Loan amount is ($360, 000 / 12) * 2. 5 = $75, 000 Additional considerations are made for inclusion of state and local taxes paid on payroll as well as health care premiums in the salary amounts. Employees with primary residence outside of the United States are not to be included January 20, 2022 Copyright, Richey May and Company, LLP, 2020 3

Our Understanding Key Features of the PPP Loans Continued: Only lenders previously eligible under SBA programs are authorized under this program. No personal guarantees or collateral are required under this program Maximum maturity is 10 years Loan Repayment Lenders are required to provide complete payment deferment relief for impacted borrowers with covered loans for a period of not less than 6 months, including payment of principal, interest, and fees, and not more than 1 year. Note – final guidance for deferment treatment has not been issued, but required to be within 30 days. Loan Forgiveness An eligible recipient shall be eligible forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period (ends June 30, 2020): Payroll Costs Any mortgage interest paid Rent payments Utility payments Note – Loan forgiveness is prorated based on ability to maintain full payroll. January 20, 2022 Copyright, Richey May and Company, LLP, 2020 4

Our Understanding Other Considerations Participation in the PPP program may create situations where a business is subsequently blocked from eligibility in additional loan programs. Businesses should consider all options and perform a specific analysis on their own needs before applying for any form of credit. Timing of loan program is still unclear. Without final implementation guidance from SBA lenders are not in a position to accept, process or fund PPP loans. This will likely create a rush to the lenders before they are able to adequately servicer borrowers. Not all banks and credit unions will be participating in this program. If an institution was not approved to originate SBA 7(a) loans prior to the new ruling they will not be approved to originate the PPP loans. Businesses should reach out to their existing lenders / banks to confirm their participation in the program early and identify alternatives it the primary bank cannot support them with the PPP loan. January 20, 2022 Copyright, Richey May and Company, LLP, 2020 5

Our Understanding Lender Specific Considerations Covered loans under this program are 100% guaranteed by the SBA, zero risk to the bank Covered loans have a capital risk weighting of 0% Lender Admin Fees SBA will compensate lenders for covered loans based on amount of loan at the disbursement as follows: Loan balances under $350, 000 at 5% $350, 000 - $2 million at 3% Loans above $2 million at 1% January 20, 2022 Copyright, Richey May and Company, LLP, 2020 6