The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, especially for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours from 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 issued the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness For Student Loans – For those who qualify, First Draw PPP loans can be suitable for loan forgiveness. This is when the loan payment is made within an 8– to 24 week period.
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other eligible expenses.
- 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 covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
When all of the loan funds have been utilized, a borrower can apply to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.