The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The legislation required that the SBA issue simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days from 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 published updated forms.”
Forgiveness terms in the first draw of PPP loans
Public Safety Federal Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness if the loan is paid within an 8– to 24 week period.
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The proceeds of the loan could be used to pay payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness
When all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the end of the covered period and the loan is not renewed, PPP loan payments can no longer deferred and borrowers must make monthly payments to their PPP lender.