The U.S. Small Business Administration has released a single-page form that aims to simplify 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 most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within the first 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published updated forms.”
Terms for forgiveness for the first draw of PPP loans
Student Loans Not Forgiven – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan will be able to receive the loan payment from their PPP lender.