The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms in the first draw of PPP loans
10000 Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24 week period that follows the disbursement of loan:
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week duration following loan disbursement:
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses as well as other eligible expenses and
- At least 60% of the profits are used for the cost of payroll
- How do I apply for loan forgiveness , and the time to apply
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.