The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours after the legislation was adopted to make the application process for forgiveness. The legislation also contained conditions that aim to increase the number of 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 publish the one-page form for PPP loan forgiveness within 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms in the first draw of PPP loans
Central Processing Center For Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- Pay and worker levels are ensured
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.