The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released updated forms.”
Forgiveness terms in the first draw of PPP loans
Will Sba Loans Be Forgiven – For borrowers who are eligible, First Draw PPP loans can be eligible to be forgiven. This is if the loan disbursement occurs within an 8 to 24 week period.
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan funds are used on payroll and other expenses that are eligible and
- Minimum 60% of proceeds go to payroll costs
- How to request loan forgiveness and when
Once all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making loan payments to their PPP lender.