The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, especially for minority-owned companies that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 days of 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 released updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Service Loan Forgiveness Government Contractor – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following loan payment:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds could be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to expenses for payroll
- How to apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.