The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the legislation being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for 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 requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 days 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 updated forms.”
Forgiveness terms in the first draw of PPP loans
Fed Loan Public Service Forgiveness Form – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24 week period that follows loan disbursement:
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
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 8– to 24-week duration following loan payment:
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds could be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the period covered the PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.