The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours of the date of the enactment of 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 updated forms.”
Forgiveness terms for the initial draw of PPP loans
Public Service Loan Forgiveness Phone Number – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week covered period following loan disbursement:
- This is also true for compensation and employees.
- The proceeds from the loan may be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan proceeds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
- How do I request loan forgiveness and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time up to the date of maturity. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.