The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the application process for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 hours from 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 released new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
Federal Stafford Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following the disbursement of loan:
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment if the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are used for the cost of payroll
- How do I apply for loan forgiveness and when to apply
A borrower can apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the date of maturity. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan are eligible to receive payment from their PPP lender.