The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 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 new forms.”
First Draw PPP Terms of loan forgiveness
Student Loan Flagged For Forgiveness – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan funds are used on payroll costs as well as other eligible expenses and
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.