The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying 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 package last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within the first 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 issued additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Public Setvice Loan Forgiveness Form – For those who qualify, First Draw PPP loans can be qualified for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week period.
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The loan funds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.