The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 days of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions meant to encourage more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“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, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms in the first draw of PPP loans
Cal Poly Student Loan Forgiveness – For those who qualify, First Draw PPP loans are eligible for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- The same goes for the compensation and employees.
- The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is repaid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll as well as other eligible expenses and
- A minimum of 60% of the profits are used to pay for payroll expenses
- How do I apply for loan forgiveness and the time to apply
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers must make monthly payments to their PPP lender.