The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness For Government Employees – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24 week period that follows loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making loan payments to their PPP lender.