The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for loan forgiveness under the PPP by 24 days after 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 issued the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Are Loan Forgiveness Programs Legit – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- It’s the same for employee compensation and the.
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits go towards payroll costs
- How to apply for loan forgiveness and the time to apply
When all of the loan funds have been utilized the borrower is eligible to be forgiven. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the time period that was covered the PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.