The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that would 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, said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 days from 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 issued new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Stem Loan Forgiveness Program – For eligible borrowers, First Draw PPP loans can be qualified to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week time period after loan disbursement:
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when to apply
When all of the loan’s proceeds have been used the borrower is eligible to be forgiven. 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 years of the last day of the covered period, then PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.