The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 hours after the legislation was adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, particularly for minority-owned companies that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 days 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 published updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness Scholarships – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness if 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 the identical manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of proceeds go to expenses for payroll
- How to apply for loan forgiveness , and when to apply
After all loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the end of the time period that was covered, then PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.