The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
10 Year Public Service Loan Forgiveness Calculator – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week period after loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are eligible for loan repayment if the loan is paid within an 8– to 24 week time frame.
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- At least 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers can request forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.