The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 days of the legislation being adopted to make the application process for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses who struggled to get loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to publish the one-page PPP form 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 updated forms.”
Forgiveness terms for the first draw of PPP loans
Usa Funds Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be qualified to forgive loans. This is when the loan payment is made within an 8 to 24 week period.
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered, then PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.