The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned companies that struggled to get 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 one-page PPP form loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
First Draw PPP Terms of loan forgiveness
Loan Forgiveness Form – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- A minimum of 60% of profits are used to pay for payroll expenses
- How do I apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the period covered the PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.