The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness 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.”
Forgiveness terms in the initial draw of PPP loans
Can An Sba Loan Be Forgiven – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following the disbursement of loan:
- It’s the same for pay and benefits for employees.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- How do I apply for loan forgiveness and when to apply
After all loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.
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