The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being adopted to make the procedure of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, particularly for minority-owned companies that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the first draw of PPP loans
Forgivable Home Loan Program – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- How do I apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are able to receive payment from their PPP lender.