The U.S. Small Business Administration has released a single-page form that aims to simplify the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement 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 issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Would Parent Plus Loans Be Forgiven – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay for expenses for payroll or other expenses that are eligible.
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.