The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of 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 last month that included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned companies that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said 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 on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms that were updated.”
First Draw PPP Loan forgiveness terms
Federal Government Student Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This applies when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds could be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
- How to apply for loan forgiveness , and when
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can request forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months of the end of the time period that was covered and the loan is not renewed, PPP loan payments are not deferred any longer, and the borrower will be required to make payment to their PPP lender.