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Paycheck Protection Program 

SBA Paycheck Protection Program (PPP)

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Update for PPP Loan Forgiveness

Please note that Cathay Bank is currently processing PPP forgiveness applications for the 1st draw PPP loans in manageable batches. When your PPP loan is selected to apply for forgiveness, you will be notified via email with an invitation link to apply online. Please be assured that you have until 10-months from the end of your covered period (8 or 24 weeks) to apply for loan forgiveness.

 

Highlights for the upcoming Paycheck Protection Program

After several months of contentious negotiations, a new $900 billion COVID-19 relief package was unveiled by Congress on December 21, 2020. Since then, both the House and the Senate have quickly passed this new bill. The new stimulus bill, which will include $284 billion in new funding for another draw of the Paycheck Protection Program (“PPP”) as well as a new tiered, simplified process for loan forgiveness for loans up to $2 million, was signed by President Trump on December 27, 2020.

 

Here are the highlights for the Second Draw PPP based on the information we have at this time:

  • Maximum loan amount will be $2,000,000 (reduced from $10,000,000)
  • Maximum number of employees will be 300 (reduced from 500)
  • Loan amount calculations will remain the same at 2.5x the monthly average payroll except:

    — For businesses with NAICS code starting 72 (Accommodation and Food Services), loan amount calculations will be based on 3.5x the monthly average payroll.

  • Applicants will need to provide proof of at least 25% reduction in gross receipts in any quarter in 2020 compared to 2019.
  • Borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs.
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
  • Businesses can apply for a Second Draw PPP loan whether or not they have requested forgiveness for the First Draw PPP loan. Businesses must have spent or expect to spend the full amount of their First Draw PPP loan before receiving funding for the Second Draw PPP loan.

Please also note the additional timeline included in the new bill:

  • Community financial institutions will be able to make First Draw PPP loans on Monday, January 11, and Second Draw PPP loans on Wednesday, January 13. The PPP will open to all other participating lenders, including Cathay Bank, shortly thereafter. Cathay Bank will start accepting PPP loan applications on Monday, January 11 and will submit the applications in queue to SBA for processing as soon as the portal allows us to do so. 
  • Funding of PPP loans is available until March 31, 2021, or when the money runs out.  

We are also happy to announce that for the next draw of PPP funding, we have enhanced and automated the loan origination process. All applications and required documentation will be submitted through an online portal for your convenience.  

The new bill will also provide changes to the PPP loan forgiveness process. Specifically, the changes would provide for a tiered forgiveness application process that would reduce the required paperwork to varying degrees for both loans under $150,000 and for loans between $150,001 to $2,000,000. Below are some general details on the expected changes based on the new bill:

  • There will be new simplified process for ALL loans less than $150,000 that have not already been forgiven requiring no documentation from the borrower.  
  • Loans over $150,000 and under $2 million will continue to require documentation to be submitted but a simplified application process is expected. Specifics are still pending.
  • The EIDL advance will no longer be deducted from the forgiveness payments.

    — Any advances already deducted will be retroactively paid to the borrower by the SBA once procedures are established.

We will be offering the PPP loans to businesses located in states with a Cathay Bank Branch.

Please note that we will be requiring a Cathay Bank Business Checking Account prior to completing applications as we will need disbursement account information.

 

As of January 11, 2021

 

 

Frequently Asked Questions

1. 2nd Draw PPP: Is Cathay Bank currently accepting Second Draw PPP Loan Applications?

Community financial institutions will be able to make First Draw PPP loans on Monday, January 11, and Second Draw PPP loans on Wednesday, January 13. The PPP will open to all other participating lenders, including Cathay Bank, shortly thereafter. Cathay Bank will start accepting PPP loan applications on Monday, January 11 and will submit the applications in the queue to SBA for processing as soon as the portal allows us to do so.

As of January 10, 2021 

2. 2nd Draw PPP: How can I apply for the PPP loan?

Cathay Bank will only be accepting applications via a separate online portal. The website link will be available to all Applicants on Monday, January 11. Please check the bank’s website cathaybank.com frequently for updates.

As of January 10, 2021

3. 2nd Draw PPP: Can I submit hand-written applications to my Cathay Bank Banker?

No. We will not be able to accept any hand-written applications in person or via email. All applications must be submitted electronically through our online application portal. The link will be provided on our website.

As of January 10, 2021

4. 2nd Draw PPP: Is this loan considered “free money”?

No. The Paycheck Protection Program was initiated primarily to ensure that employees in the U.S. are paid due to wage interruptions caused by the COVID-19 pandemic. Please be advised that any portion of the loan that is not forgiven will be payable and due based on loan terms set forth by the program. Applicants should utilize this program responsibly while taking into consideration that debt forgiveness is not guaranteed approval and subject to extensive eligibility requirements & documentation after the loan is funded. Submission of a completed application package does not automatically guarantee processing or approval from the lender and U.S. Small Business Administration. Applicants should also take into consideration their ability to repay all or a portion of this loan.

As of January 10, 2021

5. 2nd Draw PPP: How large can my loan be?

The lesser of $2,000,000 or 2.5 times your average monthly payroll costs during FY 2019 or FY 2020 period.  For businesses with NAICS code starting 72 (Accommodation and Food Services), maximum loan amount will be based on 3.5 times the average monthly payroll costs.

As of January 10, 2021 

6. 2nd Draw PPP: When is the deadline to apply for Second Draw PPP?

March 31, 2021, or until program funds are exhausted.

As of January 10, 2021 

7. 2nd Draw PPP: How much of my loan will be forgiven?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, utilities, covered operations expenditures, covered property damage, covered supplier costs, or covered worker protection expenditures over the 8 – 24 weeks after getting the loan. Not more than 40% of the forgiven amount may be for non-payroll costs.    

As of January 10, 2021

8. 2nd Draw PPP: What portion of the loan amount needs to be for payroll and other qualified expenses?

At least 60% of the loan amount must be used for payroll expenses and 40% on qualified expenses to be eligible for full forgiveness. If less than 60% of the debt forgiveness amount was used for payroll expenses, the borrower may qualify for partial forgiveness.

As of January 10, 2021

9. 2nd Draw PPP: How many loans can I take out under this program?

Only one.

As of January 10, 2021

10. 2nd Draw PPP: What is my interest rate?

1.00% fixed.

As of January 10, 2021

11. 2nd Draw PPP: When is my loan due?

In 5 years.

As of January 10, 2021

12. 2nd Draw PPP: Can I pay my loan earlier than 5 years?

Yes.  There are no prepayment penalties or fees.

As of January 10, 2021

13. 2nd Draw PPP: Do I need to pledge any collateral for these loans?

No. Collateral will not be required for this loan.

As of January 10, 2021

14. 2nd Draw PPP: Do I need to personally guarantee this loan?

No. There is no personal guarantee requirement. However, if your loan proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.

As of January 10, 2021

15. 2nd Draw PPP: Do I need to provide any documents when I apply for this loan?

For loan amounts $150,000 and less, no supporting documents will be required at the time of application submission; however, upon or before seeking loan forgiveness (or upon SBA request) the Applicant must provide supporting documentation. For loan amounts greater than $150,000, supporting documents will be required at the time of application submission.

As of January 10, 2021

16. 2nd Draw PPP: What are considered “payroll costs”?

Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave (except those paid leave amounts for which a credit is allowed under FFCRA Sections 7001 and 7003); allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage (including insurance premiums), group life, disability, vision, or dental insurance, and retirement benefits; payment of state and local taxes assessed on compensation of employees; and, for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.

As of January 10, 2021

17. 2nd Draw PPP: How do I calculate “average monthly payroll”?

Most Applicants will use the average monthly payroll for 2019 or 2020, excluding costs over $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, for each employee. For seasonal businesses, the Applicant may elect to instead use average total monthly payroll for any twelve-week period selected by the Applicant between February 15, 2019 and February 15, 2020, excluding costs over $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, for each employee. For new businesses without 12 months of payroll costs but that were in operation on February 15, 2020, average monthly payroll may be calculated based on the number of months in which payroll costs were incurred, excluding costs over $100,000 on an annualized basis for each employee, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, for each employee.

As of January 10, 2021

18. 2nd Draw PPP: How do I determine if I had at least 25% reduction in gross receipts?

In determining whether the Applicant experienced at least a 25% reduction in gross receipts, for loans above $150,000, the Applicant must identify the 2020 quarter meeting this requirement, identify the reference quarter, and state the gross receipts amounts for both quarters, as well as provide supporting documentation. For loans of $150,000 and below, these fields are not required and the Applicant only must certify that the Applicant has met the 25% gross receipts reduction at the time of application; however, upon or before seeking loan forgiveness (or upon SBA request) the Applicant must provide documentation that identifies the 2020 quarter meeting this requirement, identifies the reference quarter, states the gross receipts amounts for both quarters, and supports the amounts provided.

As of January 10, 2021

19. 2nd Draw PPP: How do I determine at least 25% reduction in gross receipts if my business was not in operation in 2019?

For all entities other than those satisfying the conditions set forth below, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the same quarter of 2019. Alternatively, Applicants may compare annual gross receipts in 2020 with annual gross receipts in 2019; applicants choosing to use annual gross receipts must enter “Annual” in the 2020 Quarter and Reference Quarter fields and, as required documentation, must submit copies of annual tax forms substantiating the annual gross receipts reduction.

  1. For entities not in business during the first and second quarters of 2019 but in operation during the third and fourth quarters of 2019, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than either the third or fourth quarters of 2019.
  2. For entities not in business during the first, second, and third quarters of 2019 but in operation during the fourth quarter of 2019, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the fourth quarter of 2019.
  3. For entities not in business during 2019 but in operation on February 15, 2020, Applicants must demonstrate that gross receipts in the second, third, or fourth quarter of 2020 were at least 25% lower than the first quarter of 2020.
     

As of January 10, 2021

20. 2nd Draw PPP: Can I include my forgiveness amount from the First Draw PPP loan as part of my gross receipts?

No.  Any forgiveness amount already received by the Applicant from the First Draw PPP loan will not count towards gross receipts.

As of January 10, 2021

21. 2nd Draw PPP: Can I apply for this Second Draw PPP loan if my First Draw PPP loan is currently in SBA review (“unresolved Borrower”) status?

No. U.S. SBA will not be able to process the Second Draw PPP loan request until your First Draw PPP loan is in good standing and no longer in SBA review status.

As of January 10, 2021

22. 2nd Draw PPP: Can I apply for this loan if my business is permanently closed?

No. 

As of January 10, 2021

23. 2nd Draw PPP: Can I apply for this loan if I already applied for the SBA Economic Injury Disaster Loan?

Yes.  However, you cannot apply for the Paycheck Protection Loan for the same use of proceeds requested in the SBA Economic Injury Disaster Loan.  For example, you cannot receive an SBA Economic Injury Disaster loan and Paycheck Protection Program loan for payroll expenses; however, you could get a loan for working capital through the SBA Economic Injury Disaster loan and apply for payroll related assistance through the Paycheck Protection Program.

As of January 10, 2021

24. 2nd Draw PPP: Who is not eligible for a Second Draw PPP loan?

a.    An Applicant is not eligible for a Second Draw PPP loan if the Applicant is:

  1. Excluded from eligibility for the First Draw PPP loan;
  2. A business concern or entity primarily engage in political activities or lobbying activities, as defined in section 3 of the Lobbying Disclosure Act of 1995 (2 U.S.C. 1602), including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public documents;
  3. Any business concern or entity for which an entity created in or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People’s Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or that retains, as a member of the board of directors of the business concern, a person who is a resident of the People’s Republic of China;
  4. Any person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act;
  5. Any entity in which the President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in the entity;
  6. Any issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f);
  7. An entity that has previously received a Second Draw PPP Loan; or
  8. An entity that has permanently closed.

b.    Since this is the only information available at this time, please consult with your legal counsel for further interpretation

As of January 10, 2021

25. 2nd Draw PPP: Where can I find additional program information online?

www.sba.gov/ppp or www.treasury.gov/cares

As of January 10, 2021

26. 1st Draw PPP: Is Cathay Bank currently accepting Paycheck Protection Program (“PPP”) Loan Forgiveness Applications?

Yes, Cathay Bank is currently processing PPP forgiveness applications for the 1st and 2nd round PPP loans in manageable batches. When your PPP loan is selected to apply for forgiveness, you will be notified via email with an invitation link to apply online. Please be assured that you have until 10-months from the end of your covered period (8 or 24 weeks) to apply for loan forgiveness.

As of December 24, 2020

27. 1st Draw PPP: What is the general process to obtain loan forgiveness?

To receive loan forgiveness, the Borrower must complete and submit the Loan Forgiveness Application (SBA Form 3508) along with supporting documents to the lender. As a general matter, the lender will review the application and make a decision regarding loan forgiveness. The lender has 60 days from receipt of a complete application to issue a decision to SBA. Borrowers will not have to make the PPP loan payments until the debt forgiveness decision is made.

As of June 15, 2020

28. 1st Draw PPP: How much time do I have to use the PPP loan proceeds?

Borrowers who received PPP loan proceeds prior to June 5, 2020, can choose to extend the 8-week period (known as the “covered period”) to 24-weeks. Borrowers who received PPP loan proceeds on or after June 5, 2020, will have a 24-week covered period. The PPP Flexibility Act was designed to make it easier for more borrowers to reach full, or almost full, forgiveness.

As of June 15, 2020

29. 1st Draw PPP: When does the covered period start?

On the first day of loan disbursement or on the first day that payroll expenses are paid on the normal payroll cycle. Covered period cannot extend beyond December 31, 2020.

As of June 15, 2020

30. 1st Draw PPP: What portion of the debt forgiveness amount needs to be for payroll and other qualified expenses?

At least 60% of the debt forgiveness amount must be used for payroll expenses and 40% on qualified expenses to be eligible for full forgiveness. If less than 60% of the debt forgiveness amount was used for payroll expenses, the borrower may qualify for partial forgiveness.

As of June 15, 2020

31. 1st Draw PPP: What is the new safe harbor deadline?

Borrowers can use the 24-week covered period to restore their workforce levels and wages to pre-pandemic levels required for full forgiveness. This must be done by December 31, 2020, a change from the previous deadline of June 30, 2020.

As of June 15, 2020

32. 1st Draw PPP: If a portion of my PPP loan is not forgiven, what is the repayment term?

If the Borrower received the SBA Loan Number on June 5, 2020, or later, the repayment term will be 5-years with 1.00% interest. If the Borrower received the SBA Loan Number prior to June 5, 2020, the repayment term will be 2-years with 1.00% interest.

As of June 15, 2020

33. 1st Draw PPP: Will loan forgiveness amount be reduced if borrower laid-off or reduced the hours of an employee, then offered to rehire same employee for the same salary and no. of hours, or restore the reduction in hours, but employee declined offer?

No. Employees whom the borrower offered to rehire are generally exempt from the CARES Act’s loan forgiveness reduction calculation. Borrower must maintain documentation evidencing the rehiring efforts.

As of June 15, 2020

34. 1st Draw PPP: Are there caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?

Yes, the amount of loan forgiveness for owner-employees and self-employed individuals’ payroll compensation can be no more than $15,385 when using the 8-week covered period and $20,833 when using the 24-week covered period per individual.

As of December 24, 2020

35. 1st Draw PPP: What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone. Eligible use of proceeds includes the following:

  • Payroll costs, including benefits
  • Mortgage interest obligations for business related debt, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020
  • Utilities related to business operations, for which service began before February 15, 2020

As of April 7, 2020

36. 1st Draw PPP: Is this loan considered “free money”?

No. The Paycheck Protection Program was initiated primarily to ensure that employees in the U.S. are paid due to wage interruptions caused by the COVID-19 pandemic. Please be advised that any portion of the loan that is not forgiven will be payable and due based on loan terms set forth by the program. Applicants should utilize this program responsibly while taking into consideration that debt forgiveness is not guaranteed approval and subject to extensive eligibility requirements & documentation after the loan is funded. Submission of a completed application package does not automatically guarantee processing or approval from the lender and U.S. Small Business Administration. Applicants should also take into consideration their ability to repay all or a portion of this loan.

As of April 7, 2020

37. 1st Draw PPP: Who can apply?

All businesses – including nonprofits, veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet the applicable SBA employee-based size standards for those industries.

As of April 7, 2020

38. 1st Draw PPP: How many loans can I take out under this program?

Only one.

As of April 7, 2020

39. 1st Draw PPP: What can I use these loans for?

  • Payroll costs, including benefits
  • Mortgage interest obligations for business related debt, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020
  • Utilities related to business operations, for which service began before February 15, 2020

As of April 7, 2020

40. 1st Draw PPP: What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

As of April 7, 2020

41. 1st Draw PPP: How large can my loan be?

The lesser of $10,000,000 or 2.5 times your average monthly payroll costs for the past year. Please refer to the calculation worksheet provided separately.

As of April 7, 2020

42. 1st Draw PPP: What is my interest rate?

1.00% fixed.

As of April 7, 2020

43. 1st Draw PPP: Can I pay my loan earlier than 2 years?

Yes. There are no prepayment penalties or fees.

As of April 7, 2020

44. 1st Draw PPP: Do I need to pledge any collateral for these loans?

No. Collateral will not be required for this loan.

As of April 7, 2020

45. 1st Draw PPP: Do I need to personally guarantee this loan?

No. There is no personal guarantee requirement. However, if the loan proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.

As of April 7, 2020

46. 1st Draw PPP: Can I apply for this loan if I already applied for the SBA Economic Injury Disaster Loan?

Yes. However, you cannot apply for the Paycheck Protection Loan for the same use of proceeds requested in the SBA Economic Injury Disaster Loan. For example, you cannot receive an SBA Economic Injury Disaster loan and Paycheck Protection Program loan for payroll expenses; however, you could get a loan for working capital through the SBA Economic Injury Disaster loan and apply for payroll related assistance through the Paycheck Protection Program.

As of April 7, 2020

47. 1st Draw PPP: Can I apply for this loan if I am a landlord of an investment property generating rental income from tenants?

No. However, you are eligible to apply for relief assistance through the SBA Economic Injury Disaster loan program.

As of April 7, 2020

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Have a Question?

Please contact our SBA Department for all your SBA Loan needs at 866-228-4296 or speak with your local Cathay Bank branch manager.