The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, along with newly revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting 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 PPP form loan forgiveness within 24 hours from 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 the updated forms.”
First Draw PPP Loan forgiveness terms
PPP Loan Forgiveness Application New Rules – For eligible borrowers, First Draw PPP loans are qualified to be forgiven. This happens when the loan is disbursed within an 8 to 24 week period.
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
- How to request loan forgiveness and when to apply
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the last day of the period covered the PPP loan payments can no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.