The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies 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 issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Forgivable Home Repair Loans – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after loan disbursement:
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.