Support With PPP

Congress revived the Paycheck Protection Program (PPP) as part of the $900 billion COVID-19 relief bill (i.e. Consolidated Appropriations Act, 2021) that was signed into law on Dec. 27. This legislation includes the Economic Aid Act which extends the authority to make PPP loans through May 31, 2021 and revives the PPP with many of the same parameters as the 2020 first CARES ACT program, there are several important differences.

There are 4 primary components of the Economic Aid Act:

1. New PPP funding for companies who did not receive a PPP loan in round one

2. A second draw of funding for companies who did received a PPP loan in round one

3. An expansion of additional eligible expenses to be included for PPP loan forgiveness

4. A simplified forgiveness process for PPP loans under $150,000

The Covered Period begins on the origination date of your PPP loan — which is also the date HSBC disbursed the funds to you — and ends on a date you select that is between 8 and 24 weeks after the date your loan was disbursed.

You can find the interest rate and term period for your PPP loan in your SBA note.

If you received a PPP loan from HSBC and are considering a sale of all or part of your business, whether via a stock sale or asset sale, or a change in ownership (of any percentage) please contact your HSBC Relationship Manager as soon as possible. Certain approvals from HSBC and/or the SBA are required for changes in ownership and sales of the business in part or full, and taking action without prior approval could result in a default under your PPP loan documents and SBA program requirements. You also remain responsible for the PPP loan regardless of an ownership change. Additionally, you remain responsible for obtaining, preparing, and retaining all required PPP forms and supporting documentation and providing those forms and supporting documentation to us or to the SBA upon request The SBA has outlined its required procedures for changes of ownership of an entity that has received PPP funds in the following procedural notice: https://home.treasury.gov/system/files/136/PPP-Procedural-Notice-PPP-Loans-and-Changes-of-Ownership.pdf. Your PPP loan documents also contain HSBC consent requirements in excess of the PPP procedural notice requirements, and should be reviewed prior to undertaking any transaction.

The calculations and other information in your forgiveness application and the determinations and certifications you make in connection with your application are your responsibility, so we strongly encourage you to consult with your accounting, legal and other advisors in preparing your forgiveness application. They can provide guidance on application related questions and determinations, including:

• Questions about preparing and completing the forgiveness application, including questions and determinations around eligible expenses and employee and salary maintenance,

• Questions surrounding rehiring: when, how, delays, raises, consistency of employee headcount.

• Questions about variable salary expenses: commissions, tips, etc.

It depends on what question you have and what step of the process you are in:

• For questions about preparing and completing the forgiveness application, including questions and determinations around eligible expenses, employee and salary maintenance, please consult your accountant or lawyer.

• For questions about access to HSBCnet or HSBC SmartServe please email Caresact.hsbc@us.hsbc.com.

• Once you’ve confirmed your access to HSBC SmartServe the quickest way to get a response from us will be by asking through the platform. Please ask all questions within the platform using the comment function on the bottom of the page.

The government eligibility criteria is described in the Paycheck Protection Program rules set forth in the respective IFRs available on the SBA website. We encourage you to consult the program rules along with your accounting, legal and other advisors in determining your eligibility.

In order to be eligible for a new PPP loan through HSBC you must meet the government standards for eligibility and be an existing US HSBC business customer that processes your payroll through an HSBC business account as of January 1, 2021.

In addition to new loans, Congress made funding available to businesses that had previously received a PPP loan in round one. The maximum amount of a second-draw PPP loan is $2 million. We strongly encourage you to consult with the program rules along with your accounting, legal and other advisors in determining your eligibility. The government eligibility criteria is described in the Paycheck Protection Program rules available on the SBA website.

In order to be eligible for a Second Draw PPP loan through HSBC you must meet the government standards for eligibility and be an existing US HSBC business customer that processes their payroll through an HSBC business account as of January 1, 2021.

The SBA has provided guidance on ‘How to Calculate’ loan amounts for both First Draw and Second Draw loans:

First Draw: https://www.sba.gov/document/support-how-calculate-first-draw-ppp-loan-amounts

Second Draw: https://www.sba.gov/document/support-second-draw-ppp-loans-how-calculate-revenue-reduction-maximum-loan-amounts-including-what

You must submit sufficient documentation to establish eligibility and to demonstrate the qualifying payroll amount requested, which may include, as applicable, payroll records; payroll tax filings; Form 1099-MISC, Miscellaneous Income; Form 1040, Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming; income and expenses from a sole proprietorship; or bank records. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

You must use your PPP loan funds on expenses which are allowed under the PPP rules. In order to obtain full forgiveness, you must use the PPP loan funds on eligible expenses during the loan forgiveness covered period. See FAQ above which describes the loan forgiveness covered period. For more guidance on forgiveness, please consult the SBA website.

When determining PPP loan forgiveness both eligible payroll costs and eligible nonpayroll costs may be included in the forgiveness amount applied for. The instructions for both the Form 3508 and Form 3508EZ state that for the nonpayroll costs you are not required to report payments that you do not want to include in the forgiveness amount. Given this, if you reach your maximum forgiveness amount applied for by reporting eligible payroll costs only, then you may consider not including eligible nonpayroll costs within your application if you do not want to include them in the forgiveness amount.

Yes. The SBA may review any PPP loan of any size at any time. If the SBA undertakes such a review, they will contact us and we will notify you. During the period of SBA review, we are not allowed to approve the application for forgiveness until the SBA notifies us that it has completed its review.

If the SBA determines that you are ineligible for a PPP loan, SBA will direct us to deny the loan forgiveness application. Further, if the SBA determines that you are ineligible for the loan amount or loan forgiveness amount claimed, the SBA will direct us to deny the loan forgiveness application in whole or in part, as appropriate. The SBA may also seek repayment of the outstanding PPP loan balance or pursue other available remedies.

The SBA is reviewing all loans of $2 million or more for eligibility, fraud or abuse, and compliance with loan forgiveness requirements. As part of this process, the SBA is providing a Loan Necessity Questionnaire to HSBC customers who, together with their affiliates, received loans of $2 million or more. In anticipation of receiving this request we suggest you begin collecting the documentation and information needed to complete Form 3509/3510. We encourage you to consult with your accounting, legal and other advisors in preparing for the request. If you do receive this request you will need to return the completed questionnaire to us within 10 business days of receipt. If you don’t your forgiveness application decision could be impacted per SBA guidelines and requirements. We will reach out to you if and when we receive this request from the SBA.

In order to be eligible for a new PPP loan through HSBC you must meet the government standards for eligibility and you must process your payroll through an HSBC deposit account.

HSBC will intake new first time PPP applications via our digital platform HSBC SmartServe. HSBC SmartServe is accessed using an HSBCnet username. You should have received an email from HSBC USA requesting critical information to access HSBC SmartServe. Please respond to the email as soon as possible to ensure you can access the platform if you want to apply.

HSBC SmartServe can be found at: https://smartserve.hsbc/.

Please email Caresact.hsbc@us.hsbc.com to request assistance with HSBC SmartServe access issues.

In order to be eligible for a Second Draw PPP loan through HSBC customers must meet the government standards for eligibility and be an existing US HSBC business customer that processes their payroll through an HSBC business account as of January 1, 2021.

Forgiveness is not automatic.

You must elect to apply for loan forgiveness. If you received your PPP loan through HSBC you will apply for loan forgiveness through HSBC SmartServe our centralized platform to manage the PPP loan forgiveness process, including related tasks, documents and communications.

To login visit https://smartserve.hsbc/ and enter your existing HSBCnet username and Security Device passcode (generated by your physical Security Device not via mobile app). As of January 19, 2021 the SBA has published new PPP forgiveness applications. HSBC will be incorporating the new applications into HSBC SmartServe on March 8, 2021. At that time, you will be able to initiate the loan forgiveness process in HSBC SmartServe. We will email you when the new forgiveness process opens and you can begin.

In order to access HSBC SmartServe for PPP loan forgiveness you will need to have an active HSBCnet username as well as have your physical Security Device.

Please email Caresact.hsbc@us.hsbc.com to request assistance with HSBC SmartServe access issues.

For help activating a new HSBCnet username, please use the below guides:

Activating a new HSBCnet ID using a hard token

Activating a new HSBCnet ID using a mobile device

In order to access HSBC SmartServe for PPP you need an active HSBCnet username and your physical security device.

Access to HSBC SmartServe is not automatically granted to all existing HSBCnet users.

If you have already been granted access to HSBC SmartServe and are still having problems logging in, please:

1. Make sure that you are able to successfully login to HSBCnet. If you are not able to login to HSBCnet, please contact the HSBCnet help desk at 888-685-4357. Once you successfully log in to HSBCnet, try to log in to HSBC SmartServe again.

2. Clear your cookies/cache and try again.

3. Try another browser

If none of the above steps work, please send an email to Caresact.hsbc@us.hsbc.com

HSBC customers will utilize LiveSign to sign loan documents during the PPP process. LiveSign is a solution that replaces paper and ink signature processes with fully automated electronic signature workflows. With LiveSign you can use a computer or mobile device to receive documentation, electronically sign it and send it back to HSBC. There’s no need to download any software or create an Adobe account

To Use LiveSign:

1. You will receive a link within HSBC SmartServe
2. You will receive instructions on how to access your documents. Please read these details carefully. The documentation can then be opened by clicking the link that says ‘Click here to review and sign’
3. Once the link has been clicked, you’ll see a message on the screen to use two-factor authentication using phone verification. You have 2 options: Voice Call or Text Message.
4. Selecting Voice Call will trigger a call to you and dictate a verification code. Selecting Text Message will send a verification code in a text message to you.
5. The verification code generated needs to be input on your LiveSign page.

Once the signing process is complete, the Adobe system provides you with a signed copy of your document and an audit trail of the signing events for your records.

If your PPP loan received an SBA loan number on or after June 5, 2020, the loan has a five-year maturity. If your PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity, unless you and HSBC mutually agree to extend the term of the loan to five years. The promissory note for the PPP loan will state the term of the loan. If you have questions about an extension or want to request an extension from 2 to 5 years, please use the comment function within HSBC SmartServe to ask our team.

On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) was signed into law, amending the CARES Act. One of the changes under the Flexibility Act is to PPP loan payment deferrals. As a result of the Flexibility Act, your first payment date may be different than what is stated in your U.S. Small Business Administration Note. We will update you with your first payment date via email. The general rules are:

• If you submit a loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you will not have to make any payments of principal or interest on your loan before the date that we receive a response from the SBA regarding your loan forgiveness amount. For wholly forgiven loans we will notify you when we receive payment from the SBA. For loans which are partially forgiven or not forgiven, the payment schedule for the unforgiven portion will be calculated and you will be advised of your next repayment date and amount due. As a reminder, interest continues to accrue during the deferment period.

• If you do not submit a loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you must begin paying principal and interest after that period. For example, if your PPP loan was disbursed on June 25, 2020, the 24-week period ends on December 10, 2020. If you do not submit a loan forgiveness application by October 10, 2021, you must begin making payments on October 10, 2021.

• Additionally, if SBA determines that the loan is not eligible for forgiveness (in whole or in part), the PPP loan is no longer deferred and the borrower must begin paying principal and interest.

Up to 100% of the principal amount of a PPP loan plus accrued interest may be forgiven if you use the loan funds for forgivable uses over a 24-week period beginning on the date your PPP loan was disbursed (or for those borrowers whose loan was made before June 5, 2020, you may elect to have your loan forgiveness covered period be the eight-week period beginning on the date your PPP loan was disbursed).

To receive full loan forgiveness, you must use at least 60 percent of the PPP loan for eligible payroll costs, and not more than 40 percent of the loan forgiveness amount may be attributable to eligible non-payroll costs.

For example, if a you receive a $100,000 PPP loan, and during the covered period you spend $54,000 (or 54 percent) of the loan on payroll costs, then because you used less than 60 percent of your loan on payroll costs, the maximum amount of loan forgiveness you may receive is $90,000 (with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and $36,000 in non-payroll costs constituting 40 percent of the forgiveness amount).

There are certain actions that may reduce the amount of forgiveness you qualify for, such as reducing the number of employees you have or reducing employee salaries or wages. (See below FAQs for more details)

The funds from PPP loans are not lines of credit. Any pay down or payoff of the PPP loan funds would permanently reduce the loan balance.

Please contact your accountant for specifics.

Borrowers that received a PPP loan of $150,000 or less will be eligible to use the simplified forgiveness application Form 3508S.

As part of the Economic Aid Act there is an expansion of eligible expenses to be included for forgiveness.

You can have your first- and second-draw loans forgiven if the funds are used on eligible costs within the applicable covered period. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:

• Covered worker protection expenditures.

• Covered property damage costs.

• Covered supplier costs.

• Covered operations expenditures.

Please review the Paycheck Protection Program details on each of the above categories of expenditures. We strongly encourage you to consult with the program rules along with your accounting, legal and other advisors in determining your eligible expenses.

You may submit a loan forgiveness application any time on or before the maturity date of your PPP loan if you have used all of the loan proceeds for which you are requesting forgiveness.

For Second Draw PPP Loans in excess of $150,000, the borrower must submit its loan forgiveness application for the First Draw PPP Loan before or simultaneously with the loan forgiveness application for the Second Draw PPP Loan, even if the calculated amount of forgiveness on the First Draw PPP Loan is zero.

You can apply for loan forgiveness using SBA Form 3508S only if your total PPP loan amount was $150,000 or less.

Payroll costs paid during the Covered Period are eligible for forgiveness. Payroll costs incurred but not paid during the borrower’s last pay period of the Covered Period are still eligible for forgiveness if paid on or before the next regular payroll date. Payroll costs are considered paid on the date that paychecks are distributed or the borrower originates ACH (automated clearinghouse) credit transactions. Payroll costs are considered incurred on the day that the employee’s pay is earned.

A non-payroll cost is eligible for forgiveness if it was: a) paid during the Covered Period; or b) incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.

Example: A borrower who received a loan before June 5, 2020, uses a 24-week Covered Period that begins on June 1 and ends on November 15. The borrower pays its electricity bills for June through October during the Covered Period and pays its November electricity bill on December 10, which is the next regular billing date. The borrower may seek loan forgiveness for its June through October electricity bills, because they were paid during the Covered Period. In addition, the borrower may seek loan forgiveness for the portion of its November electricity bill through November 15 (the end of the Covered Period), because it was incurred during the Covered Period and paid on the next regular billing date.

Forgiveness is not automatic.

You must elect to apply for loan forgiveness. If you received your PPP loan through HSBC you will apply for loan forgiveness through HSBC SmartServe our centralized platform to manage the PPP loan forgiveness process, including related tasks, documents and communications.

To login visit https://smartserve.hsbc/ and enter your existing HSBCnet username and Security Device passcode (generated by your physical Security Device not via mobile app). As of January 19, 2021 the SBA has published new PPP forgiveness applications. HSBC will be incorporating the new applications into HSBC SmartServe on March 8, 2021. At that time, you will be able to initiate the loan forgiveness process in HSBC SmartServe. We will email you when the new forgiveness process opens and you can begin.

In order to access HSBC SmartServe for PPP loan forgiveness you will need to have an active HSBCnet username as well as have your physical Security Device.

Please email Caresact.hsbc@us.hsbc.com to request assistance with HSBC SmartServe access issues.

After you have uploaded the required documents to HSBC SmartServe, an analyst from the HSBC Business Relief Team will ensure your application is complete and that you have attested to the accuracy of the documentation and information.

The HSBC analyst will also conduct a review of the information submitted within the application and the required supporting documents.

If documentation or information is missing, you will receive an email from HSBC SmartServe to login and upload and/or correct missing documentation and/or information. Please do this as promptly as possible. Please add communications.no-reply@hsbc.com to your safe list so that these emails will not go to your spam folder.

Once complete, customer applications will be submitted to the SBA.

Once you submit your loan forgiveness application within HSBC SmartServe, we will review your application for quality and completeness and reach out to you directly if more information is needed. The SBA has up to 90 days to review the PPP loan and forgiveness documentation once HSBC has submitted your completed application to the SBA. Once approved by the SBA, your forgiveness status will be communicated to you. The decision may be an approval (in whole or in part); denial; or (if directed by the SBA) a denial without prejudice due to a pending SBA review of the loan. In the case of a denial without prejudice, you may subsequently request that we reconsider your application for loan forgiveness, unless the SBA has determined that you are ineligible for the PPP loan.

Per SBA guidance, if you use PPP funds for unauthorized purposes, the SBA will require you to repay those amounts as they will not be forgiven.

If you knowingly use the funds for unauthorized purposes, you will can be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, the SBA will have recourse against the shareholder, member, or partner for the unauthorized use.

Please consult your accountant for specific advice.

For loans which are partially forgiven, the payment schedule for the unforgiven portion will be calculated and you will be advised of your next repayment date and amount due.

Loan payments will be deferred as per SBA requirements and 1% interest will continue to accrue. The key loan terms are:

Loan Terms:

• A 1% interest rate

• For loans made prior to June 5, 2020, a 2-year loan term from origination that can be extended to 5 years if mutually agreed upon by you and HSBC.
• For loans made on or after June 5, 2020, a 5-year loan term from origination

The SBA defines “made” as the date the SBA assigns a loan number to your PPP loan.

• PPP IFR Paycheck Protection Program as Amended by Economic Aid Act
• PPP IFR Second Draw Loans
• Treasury Department’s FAQs
• SBA How to Calculate First Draw PPP Loans
• Second Draw PPP Loans: How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide
• Frequently Asked Questions for Loan Forgiveness
• SBA Paycheck Protection Program Loan Forgiveness Application Form Revised (SBA Form 3508 Revised)
• SBA Paycheck Protection Program Loan Forgiveness Application Form Revised (SBA Form 3508EZ Revised)
• SBA Paycheck Protection Program Loan Forgiveness Application Form Revised (SBA Form 3508S Revised)
• SBA New Combined Forgiveness Rule
• Interim Final Rule – Appeals of SBA Loan Review Decisions under PPP
• https://www.sba.gov/document/sba-form-2483-c-first-draw-borrower-application-form-schedule-c-filers-using-gross-income
• https://www.sba.gov/document/sba-form-2483-sd-c-ppp-second-draw-borrower-application-form-schedule-c-filers-using-gross-income
• https://home.treasury.gov/system/files/136/Interim-Final-Rule-Paycheck-Protection-Program-as-Amended-by-American-Rescue-Plan-Act.pdf