The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment in 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 additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Loan Forgiveness Tax Form – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week period after loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is paid within an 8– 24 week time frame.
- The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and the time to apply
When all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers can request forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.