The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, wrote 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 enactment in 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 additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Title One Student Loan Forgiveness Form – For eligible borrowers First Draw PPP loans can be qualified for loan forgiveness. This applies when the loan payment is made within an 8– to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan funds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- 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 may apply for forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the last day of the time period that was covered the PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.