The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses who struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours of 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 new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
College Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to be forgiven. This applies when the loan payment is made within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week time period after loan payment:
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits are used to pay for payroll expenses
- How to apply for loan forgiveness , and when
Once all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness anytime 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 the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.