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 is also updated with new forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published more updated forms.”
First Draw PPP Conditions for loan forgiveness
Approved For Student Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8to 24-week period.
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months of the last day of the covered period and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.