The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
First Draw PPP Loan forgiveness terms
Public Service Loan Forgiveness Grandfather Clause – For borrowers who are eligible, First Draw PPP loans are suitable to forgive loans. This happens when the loan is disbursed within an 8– to 24 week period.
- The levels of compensation and employee pay are ensured
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is paid within an 8– 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan proceeds could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
When all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the period covered, then PPP loan payments are not deferred any longer, and borrowers must make monthly payments to their PPP lender.