The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of 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 reduce the economic burden of the coronavirus pandemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks 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 and stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Loan Forgiveness Act 2022 – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following the loan’s disbursement
- Pay and worker levels are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.