The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms for the first draw of PPP loans
PPP Loan Forgiveness Quick Form – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week period after the disbursement of loan:
- Employee and compensation levels are ensured
- The proceeds from the loan may be used to pay for the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible borrowers are eligible for loan repayment 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 as is required for the First Draw PPP loan
- The loan funds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.