The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the current stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness Act Passed – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- The same goes for the compensation and employees.
- The proceeds from the loan may be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other eligible expenses.
- At least 60% of proceeds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized The borrower may apply to be forgiven. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.