The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans particularly 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 form for PPP loan forgiveness within 24 days of 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 issued more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Is Student Loan Forgiveness A Real Thing – For those who qualify, First Draw PPP loans can be qualified to forgive loans. This happens when the loan is disbursed within an 8 to 24 week period.
- This is also true for employee compensation and the.
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan funds could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness?
After all loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.