The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote 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. The article was posted 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
Us Department Of Education Federal Student Aid Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This applies when the loan payment is made within an 8 to 24-week period.
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given 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:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan proceeds are used on payroll as well as other eligible expenses and
- A minimum of 60% of the proceeds are used for the cost of payroll
- How to apply for loan forgiveness and when
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply 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 must make monthly payments to their PPP lender.