The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that 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 package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. It also included conditions meant to encourage 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, wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Is Loan Forgiveness Real – For eligible borrowers, First Draw PPP loans can be eligible to be forgiven. This happens when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are ensured
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The proceeds of the loan could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered, then PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.