The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days from 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.”
Forgiveness terms for the initial draw of PPP loans
Fedloan Servicing Loan Forgiveness Form – For eligible borrowers First Draw PPP loans can be suitable for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The proceeds from the loan may be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week duration following the loan’s disbursement
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of proceeds are used to pay for payroll expenses
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness once all loan proceeds to which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 years of the end of the period covered the PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.