The U.S. Small Business Administration has released a single-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Title 1 Schools And Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week period after loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
- How and when to apply for loan forgiveness?
When all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.