The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain 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 24 days 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 released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
College America Loan Forgiveness – For those who qualify, First Draw PPP loans are eligible to be forgiven. This applies when the loan payment is made within an 8– to 24-week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
- How do I request loan forgiveness and when to apply
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make payment to their PPP lender.