The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
How To Apply Loan Forgiveness PPP – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement
- Pay and worker levels are kept in the same way 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 proceeds go to the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the covered period the PPP loans are not deferred any longer, and the borrower will be required to make payment to their PPP lender.