The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more specifically to minority-owned companies 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 one-page form for PPP loan forgiveness within 24 days 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 published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
William Ford Direct Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness , and when
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the last day of the period covered, then PPP loan payments can not deferred any longer, and the borrower will be required to make payment to their PPP lender.