The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions to encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting 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 hours of the date of the enactment of 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 that were updated.”
Forgiveness terms for the first draw of PPP loans
Private Loan Forgiveness – For those who qualify, First Draw PPP loans are eligible for loan forgiveness. This is when the loan is disbursed within an 8 to 24-week period.
- This is also true for compensation and employees.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers are eligible for loan repayment if the loan is paid within an 8– to 24-week time frame.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the end of the covered period, then PPP loans are no longer deferred, and borrowers will begin making payment to their PPP lender.