The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 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 bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs 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 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 issued more updated forms.”
Forgiveness terms in the initial draw of PPP loans
The PPP Loan Forgiveness Application Form 3508ez – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- This is also true for employee compensation and the.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds go to payroll costs
- How do I apply for loan forgiveness and when
After all loan proceeds have been used, a borrower can apply for forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered the PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.