The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days from 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 issued the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Fedloan Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week covered period following the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.