The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that offered $284 billion in funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Conditions for loan forgiveness
President Obama And Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week period after loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following loan payment:
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll as well as other eligible expenses and
- Minimum 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can request forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.