The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days of 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 updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness For College Professors – For eligible borrowers, First Draw PPP loans are qualified for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay for expenses for payroll or 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 eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
- How to apply for loan forgiveness and when to apply
Once all of the loan funds have been utilized the borrower is eligible to be forgiven. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 years of the last day of the covered period, then PPP loan payments can not deferred any longer, and borrowers will begin making loan payments to their PPP lender.