The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process 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 in the month of March that offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within 24 days of the legislation being signed into law to simplify the application process for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Is The Student Loan Forgiveness Program Real – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
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 8– 24 week period.
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.