The U.S. Small Business Administration released a one-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days of the bill being adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, specifically for minority-owned companies that struggled to get 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 24 days of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Ffel – For those who qualify First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8– to 24 week period.
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.