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 forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued updated forms.”
Forgiveness terms in the initial draw of PPP loans
Pathway Program Student Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to be forgiven. This is if the loan disbursement occurs within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for 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 could be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the end of the covered period, then PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.