The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses that struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 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 released the updated forms.”
First Draw PPP Loan forgiveness terms
Student Loan Interest Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week period after loan disbursement:
- Pay and worker levels are maintained
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness
Once all of the loan’s proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 years of the end of the covered period and the loan is not renewed, PPP loan payments can no longer deferred and borrowers must make loan payments to their PPP lender.