The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions to 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 said that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
Requirements For Teacher Loan Forgiveness – For eligible borrowers First Draw PPP loans are qualified to be forgiven. This applies when the loan payment is made within an 8 to 24-week period.
- The levels of compensation and employee pay are maintained
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is paid within an 8to 24-week period.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds could be used to pay for payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness
When all of the loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the time period that was covered, then PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.