The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. It also included conditions to encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 hours of 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 additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Navient Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the last day of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.