The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the application process for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who struggled to get 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 one-page form for PPP loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued the updated forms.”
Forgiveness terms in the first draw of PPP loans
First Time Home Buyer Student Loan Forgiveness – For those who qualify, First Draw PPP loans are qualified for loan forgiveness. This applies when the loan payment is made within an 8 to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments are no longer deferred and borrowers must make monthly payments to their PPP lender.