The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form 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 published the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Odds Of Student Loans Being Forgiven – For those who qualify First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- How do I request loan forgiveness and when to apply
A borrower can apply for forgiveness after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time until the loan’s maturity date. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan will be able to receive payment from their PPP lender.