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 are in line with the current stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 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 released the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Nelnet Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable to forgive loans. This is when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment if the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness and the time to apply
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.