The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
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 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Disabled Veteran Student Loan Forgiveness Program – For eligible borrowers First Draw PPP loans can be qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified customers are qualified for loan forgiveness when the loan is repaid within an 8– 24 week time frame.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
- How to request loan forgiveness and when to apply
After all loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers may apply for forgiveness at any time up to the date of maturity. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.