The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours 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 in the first draw of PPP loans
How To Account For Ppp Loan Forgiveness – For those who qualify First Draw PPP loans can be eligible for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.