The U.S. Small Business Administration released a one-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours of the legislation being signed into law to simplify the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, especially 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 obligation 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 more updated forms.”
First Draw PPP Terms of loan forgiveness
What Is Projected Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to be forgiven. This is if the loan disbursement occurs within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan funds could be used to pay payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.