New Paycheck Protection Program loan forgiveness forms available

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The US Small Business Administration (SBA) and the US Treasury Department have released new forms and guidelines to help clear up confusion regarding the Paycheck Protection Program (PPP), which was created to help small businesses keep workers on their payroll during the coronavirus crisis.

The PPP initially had strict requirements for employers who wanted to request a loan forgiveness. On June 5, however, President Donald Trump enacted the Paycheck Protection Program Flexibility Act (PPPFA), which gives employers more leeway. For example, instead of eight weeks, borrowers will now have 24 weeks from their loan disbursement to use PPP funds, or until December 31, when the program must now end. Borrowers who received loans before June 5 can still choose to use the funds within the initial eight week period.

On June 17, the SBA and the Treasury Department released a revised, “borrower-friendly” loan cancellation request, along with a simplified form for borrowers who meet any of the following criteria:

  • They are independent and have no employees.
  • They have not cut employee wages by more than 25 percent, nor have they reduced staffing levels or employee hours.
  • They have seen reductions in business activity due to health guidelines related to COVID-19 and have not cut employee wages by more than 25%.

We have gathered the latest news on this topic from SHRM online and other trusted outlets.

Options

The new forms have been updated to reflect changes made by Congress to the PPPFA lending program, including the new 24 week coverage period. Both applications give employers the option of using the funds in the initial eight-week period, if their loan was made before June 5, or the extended 24-week period.

(Bloomberg tax)

Advice

The SBA has also issued guidance on canceling PPP loans and how the administration intends to merge the original PPP rules with the PPPFA amendments into one package. The SBA has said it plans to issue additional guidance on canceling loans soon.

(Forbes)

Changes to the PPPFA

The PPPFA has given borrowers more flexibility regarding the loan amount that should be used for payroll purposes. Employers must now spend 60%, instead of the previous 75%, of PPP funds on salary costs. Salary costs include:

  • Salary, wages, commissions and tips — up to $ 100,000 annualized for each employee.
  • Employee benefits, including paid vacation, severance pay, insurance premiums and retirement benefits.
  • State and local taxes assessed on wages.

Salary costs for sole proprietors and independent contractors include salaries, commissions, income or net earnings from self-employment (up to $ 100,000 annualized). The additional 40 percent can be spent on mortgage interest, rent, utilities, and other costs. In addition, employers now have until December 31 instead of June 30 to rehire some laid-off workers if they request a loan forgiveness. Exceptions to the rehiring rule may apply depending on employee availability.

(SHRM online)

Check for FAQ updates

The SBA and the Treasury Department have regularly updated their answers to frequently asked questions, so employers should regularly check for new information on nuanced issues. For example, are businesses owned by large corporations that have the means to support ongoing operations eligible for a PPP loan? The guidelines state that “all borrowers should assess their economic need for a PPP loan against the standard established by the CARES Act and PPP regulations at the time of loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere… borrowers must always certify in good faith that their PPP loan application is necessary. ”

(US Department of the Treasury)

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