The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the legislation being signed into law to simplify the application process for forgiveness. It also included conditions meant to encourage more loans from community banks, particularly for minority-owned companies that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 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 published more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Service Loan Forgiveness Form 2017 – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24 week period that follows the loan’s disbursement
- Pay and worker levels are maintained
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is paid within an 8to 24 week period.
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration 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.