The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Conditions for loan forgiveness
Bank Of America Loan Forgiveness Letter – For eligible borrowers, First Draw PPP loans are suitable to be forgiven. This happens when the loan is disbursed within an 8– to 24-week period.
- The same goes for the employee compensation and the.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll costs as well as other eligible expenses and
- Minimum 60% of funds go to the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.