The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more loans from 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 of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published the updated forms.”
First Draw PPP Conditions for loan forgiveness
Biden Forgive Student Loans – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows the disbursement of loan:
- This is also true for compensation and employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.