The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus law.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain 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 form for PPP loan forgiveness within the first 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Conditions for loan forgiveness
Federal Employee Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This applies when the loan is disbursed within an 8– to 24 week period.
- Pay and worker levels are maintained
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are able to receive payment from their PPP lender.