The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the latest 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 reduce the economic burden of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Schools That Qualify For Loan Forgiveness – For those who qualify First Draw PPP loans are qualified for loan forgiveness. This is when the loan is disbursed within an 8 to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- At least 60% of proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 months after the end of the covered period the PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.