The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the most recent 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. This money was used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation 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 issued additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Income Driven Repayment Plan Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be suitable for loan forgiveness. This is when the loan is disbursed within an 8 to 24 week period.
- The same goes for the employee compensation and the.
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the 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 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan funds can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can 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 time period that was covered the PPP loans are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.