The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours from 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 the updated forms.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Agreement – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This happens when the loan is disbursed within an 8 to 24 week period.
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week time period after loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive payment from their PPP lender.