The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that encourage community banks 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, wrote that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours of 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 issued more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Ed Financial Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This happens when the loan payment is made within an 8 to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of funds go to payroll costs
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.