The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses 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 PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Can My Student Loans Be Forgiven – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week period after loan disbursement:
- Pay and worker levels are maintained
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used for 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 8– to 24-week time period after loan payment:
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making loan payments to their PPP lender.