The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours 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 published additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Biden Forgiving Student Loans – For those who qualify First Draw PPP loans can be suitable to forgive loans. This happens when the loan payment is made within an 8– to 24-week timeframe.
- Employee and compensation levels are ensured
- The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness if the loan is paid within an 8to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the last day of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.