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 to comply with the current stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them cope with the economic fallout 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 adopted to make the application process for forgiveness, along with conditions meant to encourage more loans from community banks, specifically for minority-owned companies that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 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 released updated forms.”
Forgiveness terms in the initial draw of PPP loans
Eidl Loan Forgiveness – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds could be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity 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 borrowers must make payment to their PPP lender.