The U.S. Small Business Administration released a one-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage banks in the community 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 PPP form, which is one page long, for loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Fafsa Loan Forgiveness Form – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the 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 repaid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered the PPP loan payments are no longer deferred, and borrowers must make loan payments to their PPP lender.