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 latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. It also included conditions that 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, said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Loan forgiveness terms
Trump Cutting Loan Forgiveness – For eligible borrowers First Draw PPP loans can be qualified to forgive loans. This applies when the loan payment is made within an 8– to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week time period after loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 months of the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.