The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help cope with the economic fallout from the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days 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 new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
PPP Loan Forgiveness Application Which One To Use – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- The same goes for the compensation and employees.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How do I request loan forgiveness and when to apply
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.
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