The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Bb&t PPP Loan Forgiveness Application – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness and the time to apply
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any point up to the loan’s maturity date. 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 can no longer deferred, and borrowers must make payment to their PPP lender.