The U.S. Small Business Administration issued a one-page application 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 latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 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 issued additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Private Student Loan Forgiveness Bill – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- This is also true for compensation and employees.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan repayment when the loan is paid within an 8– 24-week time frame.
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of funds go to the cost of payroll
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the end of the covered period the PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.