The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 days after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses who were unable to obtain 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 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Loan Forgiveness Teacher Form – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during 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 funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is paid within an 8– to 24 week time frame.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
- How do I apply for loan forgiveness and when
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are able to receive payment from their PPP lender.