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 also contains newly updated forms that are in line with the most recent stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiven loans to help cope with the economic fallout from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, especially for minority-owned businesses that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and 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 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
National Education Student Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This applies when the loan is disbursed within an 8– to 24 week period.
- It’s the same for employee compensation and the.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 years of the end of the period covered, then PPP loan payments can no longer deferred, and borrowers must make loan payments to their PPP lender.