The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
First Draw PPP Terms of loan forgiveness
Loan Forgiveness Letter Template – For eligible borrowers First Draw PPP loans are qualified for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan proceeds are used on payroll and other eligible expenses; and
- A minimum of 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive payment from their PPP lender.