The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said 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 enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms in the initial draw of PPP loans
Permanent Disability Student Loan Forgiveness – For those who qualify First Draw PPP loans can be qualified to forgive loans. This happens if the loan disbursement occurs within an 8 to 24 week period.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week duration following loan payment:
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.