The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans 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 published new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Changes To Public Service Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week period after the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of profits are used to pay for payroll expenses
- How to request loan forgiveness and when
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.