The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being signed into law to simplify the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms in the initial draw of PPP loans
When Are Student Loans Forgiven – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24 week period that follows the disbursement of loan:
- It’s the same for employee compensation and the.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the period covered, then PPP loan payments are not deferred any longer, and borrowers will begin making loan payments to their PPP lender.