The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 days after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for 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 additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
Warren Student Loan Forgiveness – For eligible borrowers First Draw PPP loans can be eligible to forgive loans. This is when the loan is disbursed within an 8– to 24 week period.
- This is also true for compensation and employees.
- The loan proceeds can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds go to payroll costs
- How to apply for loan forgiveness , and when
When all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the covered period, then PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.