The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans specifically to minority-owned companies 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 PPP form loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms for the first draw of PPP loans
Kaplan University Loan Forgiveness – For eligible borrowers First Draw PPP loans are suitable to be forgiven. This happens when the loan is disbursed within an 8 to 24-week period.
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan funds could be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness and the time to apply
Once all of the loan funds have been utilized, a borrower can apply to be forgiven. Borrowers can request forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the covered period, then PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.