The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. 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. Additionally, it included conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness Is Unfair – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness if the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan funds could be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness?
When all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers may apply for forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 years of the last day of the covered period, then PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.