The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, especially for minority-owned businesses who struggled to get loans last year.
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 from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Public Service Loan Forgiveness Verification Form – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- The same goes for the compensation and employees.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 months of the date of expiration of the period covered the PPP loans are no longer deferred and borrowers must make payment to their PPP lender.