The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Studentaid Gov Public Service Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the time period that was covered the PPP loans are not deferred any longer, and borrowers must make loan payments to their PPP lender.