The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
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 the first 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Forgiveness Of Employee Loan – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week covered period following loan disbursement:
- Pay and worker levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards expenses for payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been used. Borrowers can request forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months of the end date of the loan will be able to receive loan payments from their PPP lender.