The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours from 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
Have Student Loans Been Forgiven – For eligible borrowers First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24 week period.
- It’s the same for pay and benefits for employees.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified customers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.