The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness within 24 hours of the date of the 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 published new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Citizens Bank Ppp Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- Employee and compensation levels are maintained
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits are used to pay for payroll expenses
- How to request loan forgiveness and the time to apply
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any point up to the loan’s maturity date. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are able to receive payment from their PPP lender.