The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions that aim to increase the number of loans from community banks, particularly for minority-owned companies that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 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.”
First Draw PPP Loan forgiveness terms
Federal Student Loan Default Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are ensured
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week time period after loan payment:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of proceeds are used for the cost of payroll
- How to request loan forgiveness and when
A borrower can apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are no longer deferred and borrowers must make monthly payments to their PPP lender.