The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus epidemic. The law required that the SBA release simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to lend more particularly to 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 one-page form for PPP loan forgiveness within the first 24 hours of 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 released new forms.”
Terms for forgiveness for the first draw of PPP loans
Public Service Loan Forgiveness Employment Cerfification Form – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week covered period following loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers may apply for forgiveness at any point up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the last day of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make payment to their PPP lender.