The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the most recent 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 cope with the economic fallout from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the obligation to issue the one-page PPP form 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 additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Congress Student Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of funds go to payroll costs
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.