The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus law.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with 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 Loan forgiveness terms
Central Processing Center For Student Loan Forgiveness Applications – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24 week period that follows loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan funds 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 the time to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.