The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to 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 funds for small businesses that want forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue 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 on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
PPP Loan Forgiveness Application Status – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week covered period following loan disbursement:
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The loan proceeds are spent on payroll costs as well as other eligible expenses and
- A minimum of 60% of profits are used for the cost of payroll
- How to request loan forgiveness and when to apply
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers must make payment to their PPP lender.