The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. It included a requirement for 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 meant to encourage more bank loans by community banks, particularly for minority-owned companies that had trouble 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 one-page PPP form loan forgiveness within 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Forgiveness Covid-19 – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8 to 24 week period that follows loan disbursement:
- Employee and compensation levels are ensured
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are eligible for loan repayment if the loan is paid within an 8– to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness
After all loan funds have been utilized, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.