The U.S. Small Business Administration released a one-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within the first 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms in the first draw of PPP loans
Public Service Jobs That Forgive Student Loans – For those who qualify, First Draw PPP loans can be eligible for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24 week period.
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds are used for the cost of payroll
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been used. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the last day of the time period that was covered and the loan is not renewed, PPP loan payments can no longer deferred and borrowers must make monthly payments to their PPP lender.