The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the legislation being adopted to make the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that were unable to obtain 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 the first 24 hours from the date of enactment in 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
Barack Obama Loan Forgiveness Program – For eligible borrowers, First Draw PPP loans are eligible to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
- How to request loan forgiveness and when to apply
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can request forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.