The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours from 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 more updated forms.”
First Draw PPP Loan forgiveness terms
Sba Disaster Home Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified to be forgiven. This applies when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are ensured
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week time period after loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
- What is the best time to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months after the end of the period covered, then PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.