The U.S. Small Business Administration issued a one-page application form aimed at simplifying 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 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions that would encourage banks in the community to lend more 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 days of the date of enactment 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 new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Bu Perkins Loan Forgiveness Form – For those who qualify First Draw PPP loans can be qualified to forgive loans. This happens when the loan is disbursed within an 8 to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24-week time frame.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the last day of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.