The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days from 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 issued new forms that were updated.”
First Draw PPP Terms of loan forgiveness
Horace Mann Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to 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 repaid within an 8– 24-week time frame.
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan funds could be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.