The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the procedure of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement 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 the updated forms.”
Forgiveness terms in the first draw of PPP loans
Fed Loans Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- At least 60% of proceeds go to payroll costs
- When and how do I apply for loan forgiveness
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any time until the loan’s maturity date. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.