The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours 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 released the updated forms.”
First Draw PPP Loan forgiveness terms
Feel Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to forgive loans. This applies when the loan is disbursed within an 8 to 24 week period.
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay the cost of payroll as well as 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 to eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- How to apply for loan forgiveness , and when to apply
Once all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.
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