The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiven loans to help deal with the financial fallout from the coronavirus outbreak. It also included a requirement that 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. It also included conditions that aim to increase the number of bank loans by community banks, particularly for 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 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 published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms in the initial draw of PPP loans
Srudent Loan Forgiveness Form – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8to 24-week period.
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards expenses for payroll
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible for forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make payment to their PPP lender.