The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published updated forms.”
First Draw PPP Conditions for loan forgiveness
Private Student Loan Forgiveness Legislation – For eligible borrowers, First Draw PPP loans are eligible for loan forgiveness. This is when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are ensured
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week covered period following loan payment:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness once all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the period covered the PPP loans are not deferred any longer, and borrowers must make loan payments to their PPP lender.