The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the application process for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses who struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the one-page PPP form 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 issued more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Cleveland Clinic Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24 week period that follows loan disbursement:
- It’s the same for compensation and employees.
- The proceeds from the loan may be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week covered period following loan payment:
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness and the time to apply
A borrower can apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the period covered, then PPP loan payments can not deferred any longer, and borrowers will begin making loan payments to their PPP lender.