The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the application process for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 hours 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 published updated forms.”
Forgiveness terms in the initial draw of PPP loans
Mohela Loan Forgiveness – For eligible borrowers First Draw PPP loans are qualified for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week period.
- Pay and worker levels are ensured
- The proceeds from the loan may be used to pay payroll costs or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- How do I request loan forgiveness and the time to apply
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 months after the last day of the time period that was covered, then PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.
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