The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 days of 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 more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Repaye Loan Forgiveness – For eligible borrowers First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
Once all of the loan’s proceeds have been used The borrower may apply for forgiveness. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered, then PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.