The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses that were unable to obtain 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 one-page form for PPP loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Granite State Management Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to borrowers who are eligible can be granted 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 be maintained in an identical manner.
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.