The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain 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 PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Pay As You Go Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness and when to apply
After all loan proceeds have been used The borrower may apply to be forgiven. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.