The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more specifically to minority-owned companies that had difficulty 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 one-page PPP form 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 published additional updated forms.”
First Draw PPP Terms of loan forgiveness
Congress Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This is when the loan payment is made within an 8– to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness?
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers can request forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive the loan payment from their PPP lender.