The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the most recent 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 forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within the first 24 hours from 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 issued new forms that were updated.”
First Draw PPP Loan forgiveness terms
Student Loan Forgiveness For Dropouts – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This happens if the loan disbursement occurs within an 8– to 24 week period.
- The same goes for the compensation and employees.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the funds go to expenses for payroll
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the covered period, then PPP loan payments are no longer deferred, and borrowers must make loan payments to their PPP lender.