The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing 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 at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms for the first draw of PPP loans
Are Student Loans Forgiven If You Work For A Nonprofit – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This is when the loan is disbursed within an 8– to 24-week period.
- Pay and worker levels are ensured
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay payroll costs or other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
After all loan’s proceeds have been used The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months after the last day of the time period that was covered the PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.