The U.S. Small Business Administration has issued a one-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 last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being signed into law to simplify the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, especially for minority-owned companies that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of the enactment of 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.”
Terms for forgiveness for the initial draw of PPP loans
Sanford Brown Student Loan Forgiveness – For those who qualify First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8 to 24-week period.
- It’s the same for pay and benefits for employees.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make payment to their PPP lender.