The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included 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, said that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 hours from the date of the enactment of 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 additional updated forms.”
First Draw PPP Terms of loan forgiveness
Head Start Loan Forgiveness Forms – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of the profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered, then PPP loans are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.