The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent 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 funds were used to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more, especially to 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 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Federal Student Loan Forgiveness Form For Teachers – For borrowers who are eligible First Draw PPP loans are qualified for loan forgiveness. This applies when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment if the loan is paid within an 8to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to expenses for payroll
- How to apply for loan forgiveness and when to apply
When all of the loan proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.