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 that are in line with the current stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus outbreak. The law required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote 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 in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Ecm Form Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This is when the loan is disbursed within an 8– to 24 week period.
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan funds are used on payroll as well as other eligible expenses and
- A minimum of 60% of profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the period covered the PPP loan payments can no longer deferred and the borrower will be required to make payment to their PPP lender.