The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans in the past.
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 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Why We Shouldn T Forgive Student Loans – For eligible borrowers, First Draw PPP loans are suitable to be forgiven. This is when the loan payment is made within an 8 to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the proceeds go to payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the time period that was covered and the loan is not renewed, PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.