The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
First Draw PPP Conditions for loan forgiveness
50k Loan Forgiveness – For those who qualify First Draw PPP loans can be suitable to be forgiven. This happens when the loan payment is made within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week covered period following the loan’s disbursement
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.
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