The U.S. Small Business Administration has released a single-page form aimed at simplifying 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 most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the application process for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from 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 published updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Projected Loan Forgiveness Definition – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after the loan’s disbursement
- Pay and worker levels are maintained
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness if the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
Once all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.