The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours of the date of enactment under 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 additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Ppp Forgivable Loan – For borrowers who are eligible, First Draw PPP loans are suitable to be forgiven. This happens when the loan is disbursed within an 8 to 24-week timeframe.
- Pay and worker levels are ensured
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- How to apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the end of the period covered the PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.