The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 hours of the date of 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 that were updated.”
First Draw PPP Conditions for loan forgiveness
Department Education Student Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week period after loan disbursement:
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll as well as other eligible expenses and
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness
When all of the loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can apply for forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period, then PPP loans are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.