The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Forgiveness terms for the first draw of PPP loans
After How Many Years Are Student Loans Forgiven – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8– to 24-week period.
- It’s the same for compensation and employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8to 24-week period.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness and when to apply
After all loan funds have been utilized, a borrower can apply for forgiveness. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the date of expiration of the period covered the PPP loans are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.