The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Terms for forgiveness for the first draw of PPP loans
50000 Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week period after loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when to apply
When all of the loan proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.