The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours from 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 issued new forms that were updated.”
First Draw PPP Loan forgiveness terms
Does Loan Forgiveness Affect Your Credit – For those who qualify, First Draw PPP loans can be qualified to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week period.
- Employee and compensation levels are ensured
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness , and when
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the last day of the period covered, then PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.