The U.S. Small Business Administration released a one-page form aimed at simplifying 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 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 outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses that had trouble 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 PPP form, which is one page long, for loan forgiveness within 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 published new forms.”
Forgiveness terms for the first draw of PPP loans
Federal Public Service Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of funds go to expenses for payroll
- How do I apply for loan forgiveness , and the time to apply
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan will be able to receive loan payments from their PPP lender.