The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said 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 enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Services Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to forgive loans. This applies if the loan disbursement occurs within an 8 to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are able to receive payment from their PPP lender.