The U.S. Small Business Administration has released a form of one page 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 law.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the requirement 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. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms in the first draw of PPP loans
Student Loan Forgiveness Tax Bill – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after the disbursement of loan:
- This is also true for employee compensation and the.
- The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness after all loan proceeds to which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered, then PPP loan payments can no longer deferred, and borrowers will begin making loan payments to their PPP lender.