The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms for the first draw of PPP loans
Nea Loan Forgiveness – For those who qualify First Draw PPP loans are eligible for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.