The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said 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 enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms in the initial draw of PPP loans
50k Student Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:
- It’s the same for pay and benefits for employees.
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after loan payment:
- Pay and worker levels are maintained 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 the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the last day of the period covered, then PPP loan payments can no longer deferred and borrowers must make loan payments to their PPP lender.