The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The law requires that the SBA issue 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. Additionally, it included conditions that would 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 wrote that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within the first 24 hours from the date of enactment in 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 the updated forms.”
Forgiveness terms in the initial draw of PPP loans
PPP Loan Forgiveness Application Less Than 50k – For eligible borrowers First Draw PPP loans can be qualified to forgive loans. This is when the loan payment is made within an 8– to 24-week period.
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24 week period.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the period covered the PPP loan payments are no longer deferred and borrowers will begin making payment to their PPP lender.