The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was 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 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 days 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 released new forms.”
Terms for forgiveness for the first draw of PPP loans
Farm Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24-week covered period following the loan’s disbursement
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the covered period, then PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.