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, together with revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed 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 outbreak. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within the first 24 hours of 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 issued additional updated forms.”
First Draw PPP Loan forgiveness terms
Were Student Loans Forgiven – For eligible borrowers First Draw PPP loans can be qualified to forgive loans. This happens 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 pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is paid within an 8– to 24 week period.
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers may apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the last day of the period covered, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.