The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage banks in the community 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, stated that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within the first 24 hours of 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 released new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Pay As You Earn Student Loan Forgiveness – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This happens when the loan is disbursed within an 8 to 24-week timeframe.
- Pay and worker levels are maintained
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- A minimum of 60% of the proceeds go to expenses for payroll
- How to request loan forgiveness and when to apply
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period the PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.