The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help cope with the economic fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 days of the bill being adopted to make the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who had trouble 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 PPP form, which is one page long, for loan forgiveness within 24 hours from 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness Options – For borrowers who are eligible First Draw PPP loans can be eligible for loan forgiveness. This applies when the loan is disbursed within an 8 to 24 week period.
- The levels of compensation and employee pay are ensured
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The proceeds of the loan could be used to pay for payroll costs or other eligible expenses.
- Minimum 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the covered period and the loan is not renewed, PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.