The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the current stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 days of the bill being signed into law to simplify the application process for forgiveness. It also included conditions meant to encourage more loans from community banks, especially for minority-owned businesses who had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Military Student Loan Forgiveness Programs – For eligible borrowers, First Draw PPP loans can be suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24 week period.
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.