The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote 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. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Default Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are qualified for loan forgiveness if the loan is paid within an 8– 24 week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers will begin making payment to their PPP lender.