The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 hours of 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 released more updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness For Non Profit Organization – For eligible borrowers, First Draw PPP loans can be suitable for loan forgiveness. This is when the loan is disbursed within an 8 to 24-week period.
- Pay and worker levels are maintained
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness if the loan is paid within an 8– to 24-week time frame.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of proceeds go to the cost of payroll
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the last day of the time period that was covered the PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.