The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Conditions for loan forgiveness
Harp Loan Forgiveness – For those who qualify First Draw PPP loans can be suitable to be forgiven. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8– 24-week time frame.
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to expenses for payroll
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any point up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.