The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that 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 obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Bill – For eligible borrowers, First Draw PPP loans can be suitable to forgive loans. This applies if the loan disbursement occurs within an 8 to 24 week period.
- It’s the same for compensation and employees.
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- At least 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness?
When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.