The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 days of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote 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 the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Be On Time Loan Forgiveness Form – For borrowers who are eligible First Draw PPP loans can be eligible to be forgiven. This happens when the loan payment is made within an 8 to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used The borrower may apply to be granted forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered, then PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.