The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms.”
Forgiveness terms for the first draw of PPP loans
5 Year Teacher Loan Forgiveness Form – For those who qualify, First Draw PPP loans can be eligible to be forgiven. This is when the loan payment is made within an 8– to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive the loan payment from their PPP lender.