The U.S. Small Business Administration has released a 1-page form 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 legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. The law requires that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days from 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 in the initial draw of PPP loans
Cost Of Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week period after the loan’s disbursement
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to expenses for payroll
- How to apply for loan forgiveness and when to apply
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any point up to the date of maturity. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.