The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, especially for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of the enactment of 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 updated forms.”
Forgiveness terms in the initial draw of PPP loans
Who Qualifies For Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– 24-week time frame.
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the funds go to the cost of payroll
- How to request loan forgiveness and when
After all loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making payment to their PPP lender.