The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 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 new forms.”
Forgiveness terms in the first draw of PPP loans
Form To Forgive Federal Student Loans – For borrowers who are eligible First Draw PPP loans are suitable to forgive loans. This is when the loan payment is made within an 8 to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are eligible to receive payment from their PPP lender.