The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness 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 updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Chase Loan Forgiveness – For those who qualify, First Draw PPP loans are qualified to forgive loans. This happens when the loan payment is made within an 8– to 24-week period.
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8– to 24-week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- How to apply for loan forgiveness and when to apply
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the period covered, then PPP loans are no longer deferred, and borrowers will begin making loan payments to their PPP lender.