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 meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote 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 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 new forms.”
First Draw PPP Terms of loan forgiveness
Loan Forgiveness Taxable – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 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 forgiveness if the loan is paid within an 8– 24-week time frame.
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the proceeds are used for the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.