The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that had trouble 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 one-page form for PPP loan forgiveness within the first 24 hours from the date of enactment in 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 that were updated.”
Terms for forgiveness for the first draw of PPP loans
Bbva Ppp Loan Forgiveness – For eligible borrowers First Draw PPP loans can be eligible for loan forgiveness. This is when the loan payment is made within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week time period after loan payment:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the funds go to the cost of payroll
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.