The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that struggled to get loans in the past.
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 the first 24 hours 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 issued new forms.”
Forgiveness terms in the initial draw of PPP loans
Ppp Loan Forgiveness Under 150k – First Draw PPP loans made 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:
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after loan disbursement:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.