The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated 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 in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness For Profit Colleges – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of profits are used for the cost of payroll
- How and when to apply for loan forgiveness?
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.