The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to 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 in funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 days of the legislation being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 days of the date of 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 released the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Biden And Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be eligible for loan forgiveness. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The proceeds of the loan could be used to pay the cost of payroll as well as other eligible expenses.
- Minimum 60% of proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.