Forgivable Home Improvement Loans

Forgivable Home Improvement Loans

The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus law. 

Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.

Forgivable Home Improvement Loans

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within the first 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”

Forgiveness terms for the initial draw of PPP loans

Forgivable Home Improvement Loans – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8 to 24 week period that follows the loan’s disbursement

  • The levels of compensation and employee pay are maintained
  • The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
  • A minimum of 60% of the profits go towards the cost of payroll

Second Draw PPP Terms of Loan Forgiveness

Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following loan disbursement:

  • The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
  • The loan proceeds are spent on payroll as well as other eligible expenses and
  • At least 60% of the proceeds are spent on payroll costs
  • How to apply for loan forgiveness , and when

After all loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.

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