The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans, especially to minority-owned businesses 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 requirement to issue the one-page PPP form loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Loan forgiveness terms
Heritage Institute Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are qualified for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are used for the cost of payroll
- How to request loan forgiveness and when
After all loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.