The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions to 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 and stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within the first 24 hours from 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 released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Fed Loan Services Loan Forgiveness – For those who qualify First Draw PPP loans can be suitable to forgive loans. This is when the loan is disbursed within an 8– to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to payroll costs
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 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of proceeds go to expenses for payroll
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the last day of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.