The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
50000 Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week covered period following the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
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 loan disbursement:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- Minimum 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness , and when to apply
Once all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive loan payments from their PPP lender.