The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of the enactment of 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 the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Fedloan Loan Forgiveness Form – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after loan disbursement:
- Pay and worker levels are maintained
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds can be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply to be forgiven. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.