The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said 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 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 published more updated forms.”
Forgiveness terms in the first draw of PPP loans
Does Loan Forgiveness Include Interest – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24 week period that follows the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.