The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 days of the bill being adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned companies that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms for the initial draw of PPP loans
Trump Loan Forgiveness Plan – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the time period that was covered, then PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.