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, along with newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans by 24 days after 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.”
Forgiveness terms for the initial draw of PPP loans
Best Student Loan Forgiveness Programs – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week covered period following the disbursement of loan:
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– 24-week period.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits are used for the cost of payroll
- How to request loan forgiveness and the time to apply
After all loan proceeds have been used the borrower is eligible for forgiveness. The borrower can request forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive payment from their PPP lender.