The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment in 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
Is Ppp Loan Forgivable – 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
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is paid within an 8– 24 week time frame.
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the funds go to expenses for payroll
- What is the best time to apply for loan forgiveness
Once all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the period covered, then PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.