The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
First Draw PPP Conditions for loan forgiveness
What Is Public Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This happens when the loan payment is made within an 8 to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds are used on payroll and other eligible expenses; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week covered period following loan payment:
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period and the loan is not renewed, PPP loans are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.