The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote 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 issued updated forms.”
Forgiveness terms for the initial draw of PPP loans
How Long Does Loan Forgiveness Take – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8– to 24-week period.
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
- How and when to apply for loan forgiveness
Once all of the loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.
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