The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress adopted 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 pandemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 days 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 released more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Can Student Loans Be Forgiven – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8– to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of funds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible customers are 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 compensation levels are maintained in the identical manner.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan proceeds have been used the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.