The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 days of the bill being signed into law to simplify the application process for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned companies that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 hours of 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 released the updated forms.”
First Draw PPP Conditions for loan forgiveness
Cost Of Forgiving Student Loans – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week period after the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Loan forgiveness 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 time period after loan payment:
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness?
When all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loan payments can no longer deferred and borrowers must make monthly payments to their PPP lender.