The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
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. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
William D Ford Direct Loan Program Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so during the 8- to 24 week period that follows the loan’s disbursement
- This is also true for pay and benefits for employees.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8– 24-week period.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.