The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
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 the first 24 hours 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 released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Washington State Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week covered period following the disbursement of loan:
- It’s the same for compensation and employees.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- 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 payroll costs or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
After all loan funds have been utilized The borrower may apply to be granted forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making payment to their PPP lender.