The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued updated forms.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness Journal Entry – For those who qualify, First Draw PPP loans are qualified for loan forgiveness. This applies when the loan payment is made within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness when the loan is repaid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan proceeds could be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
- How do I request loan forgiveness and when
The borrower is eligible for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the period covered the PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.