The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses that needed loans. The money was intended to mitigate the economic effects 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 is to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 days 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 released additional updated forms.”
First Draw PPP Terms of loan forgiveness
How Do Loan Forgiveness Programs Work – 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 maintained
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
- How to apply for loan forgiveness , and when
A borrower can apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the time period that was covered the PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.
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