The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 hours of 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 more updated forms.”
First Draw PPP Loan forgiveness terms
Why Student Loans Should Be Forgiven – For borrowers who are eligible, First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8- to 24-week period.
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- The same goes for the pay and benefits for employees.
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- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
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- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
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- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
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- The loan funds could be used to cover payroll costs or other expenses that are eligible.
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- At least 60% of the proceeds are used to pay for payroll expenses
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- What is the best time to apply for loan forgiveness
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the time period that was covered the PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.
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