The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. It also included conditions that would encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Sallie Mae Teacher Loan Forgiveness Form – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week covered period following the disbursement of loan:
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.