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 revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from 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 published new forms that were updated.”
First Draw PPP Terms of loan forgiveness
When Will Student Loan Forgiveness Happen – For those who qualify, First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8 to 24 week period.
- This is also true for compensation and employees.
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
The borrower is eligible for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.