The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses who struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Accounting Treatment – For those who qualify First Draw PPP loans are qualified for loan forgiveness. This applies when the loan is disbursed within an 8– to 24 week period.
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the time period that was covered, then PPP loan payments can no longer deferred and borrowers must make monthly payments to their PPP lender.