The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within 24 hours after the legislation was adopted to make the process of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness For Doctors – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The proceeds of the loan could be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits go towards expenses for payroll
- How do I request loan forgiveness and when to apply
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.