The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said 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. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published the updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Teachers Loan Forgiveness Form – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement
- Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of proceeds are spent on payroll costs
- How to request loan forgiveness and when
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan will be able to receive payment from their PPP lender.