The U.S. Small Business Administration has released a form of one page that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest 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 outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours from the date of the enactment of the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Terms of loan forgiveness
Why Should Student Loans Be Forgiven – For eligible borrowers, First Draw PPP loans are qualified to be forgiven. This happens when the loan is disbursed within an 8 to 24-week timeframe.
- Pay and worker levels are ensured
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan payment:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 years of the last day of the period covered and the loan is not renewed, PPP loan payments can no longer deferred and the borrower will be required to make loan payments to their PPP lender.