The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses who had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published 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
Rural Health Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- Pay and worker levels are maintained
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8– 24-week time frame.
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards the cost of payroll
- How to request loan forgiveness and when to apply
The borrower is eligible for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.