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 revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within 24 days of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, specifically for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans by 24 days after 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 issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Can The President Forgive Student Loan Debt – For eligible borrowers First Draw PPP loans are eligible for loan forgiveness. This is when the loan payment is made within an 8 to 24-week timeframe.
- This is also true for employee compensation and the.
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- Minimum 60% of funds go to payroll costs
- How and when to apply for loan forgiveness?
When all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the time period that was covered the PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.