The U.S. Small Business Administration released a one-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for 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 more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Public Service Loan Forgiveness Program Employment Certification Form – For eligible borrowers First Draw PPP loans are suitable to be forgiven. This applies when the loan is disbursed within an 8– to 24-week timeframe.
- This is also true for pay and benefits for employees.
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- Employee and compensation levels are maintained in the same manner as required for 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 proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.