The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for loan forgiveness under the PPP 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 issued new forms.”
Forgiveness terms in the initial draw of PPP loans
Bank Of America Mortgage Loan Forgiveness – For eligible borrowers First Draw PPP loans can be suitable to be forgiven. This is if the loan disbursement occurs within an 8– to 24 week period.
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- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– 24-week period.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the profits go towards expenses for payroll
- How do I apply for loan forgiveness , and when to apply
When all of the loan proceeds have been used, a borrower can apply to be forgiven. 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 months after the last day of the period covered, then PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.