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, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Fedloan Public Service Loan Forgiveness – For those who qualify First Draw PPP loans are eligible to be forgiven. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following loan payment:
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 years of the date of expiration 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.