The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, said that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within the first 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Loan forgiveness terms
Should We Forgive Student Loan Debt – For borrowers who are eligible, First Draw PPP loans are suitable for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8– 24 week period.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds could be used to pay payroll costs or other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
- How do I apply for loan forgiveness and when to apply
Once all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making payment to their PPP lender.