The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms for the first draw of PPP loans
Former Ithaca College Students Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows loan disbursement:
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.