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 also contains newly updated forms that are in line with the current stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
First Draw PPP Terms of loan forgiveness
Humanitarian Forgivable Loan Program – For borrowers who are eligible, First Draw PPP loans are suitable to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week duration following loan disbursement:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.