The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that comply with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours of the signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
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 the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the first draw of PPP loans
Do Federal Student Loans Get Forgiven After 20 Years – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months after the end of the covered period the PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.
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