The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the most recent stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days 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 released the updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Loan Forgiveness Application – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24-week period after the disbursement of loan:
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8– to 24-week period.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are able to receive loan payments from their PPP lender.