The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was 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 initial draw of PPP loans
Bu Student Loan Forgiveness Forms – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24 week period that follows the disbursement of loan:
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24 week period.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.