The U.S. Small Business Administration released a one-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness, along with conditions meant to encourage more loans from community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release 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 issued new forms.”
Forgiveness terms in the initial draw of PPP loans
Deadline To Apply For Ppp Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week duration following loan payment:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
- How do I apply for loan forgiveness and when
After all loan proceeds have been used the borrower is eligible for forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.