The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms in the first draw of PPP loans
New York State Loan Forgiveness Programs – For eligible borrowers, First Draw PPP loans can be eligible to forgive loans. This applies when the loan payment is made within an 8– to 24 week period.
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other expenses that are eligible and
- Minimum 60% of profits go towards expenses for payroll
- When and how do I apply for loan forgiveness
Once all of the loan’s proceeds have been used, a borrower can apply for forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the time period that was covered the PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.