The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being adopted to make the application process for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days of 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 released more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
PPP Loan Forgiveness Form 990 Schedule B – For those who qualify 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.
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– to 24 week period.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll as well as other eligible expenses and
- A minimum of 60% of profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.