The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Terms for forgiveness for the initial draw of PPP loans
Are Student Loans Forgiven After 10 Years – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This applies when the loan is disbursed within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are able to receive payment from their PPP lender.