The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being signed into law to simplify the application process for forgiveness, along with conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses who struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within the first 24 hours 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 issued the updated forms.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Forbearance – For borrowers who are eligible First Draw PPP loans can be suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24 week period.
- The levels of compensation and employee pay are maintained
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when to apply
After all loan proceeds have been used the borrower is eligible for forgiveness. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.