The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, specifically for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Fed Loan Forgiveness Form – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after the disbursement of loan:
- The same goes for the compensation and employees.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other expenses that are eligible and
- Minimum 60% of profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.