The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus law.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting 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 released more updated forms.”
Forgiveness terms in the first draw of PPP loans
Department Of Education Loan Forgiveness Program – For eligible borrowers, First Draw PPP loans are qualified to forgive loans. This applies if the loan disbursement occurs within an 8 to 24 week period.
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following loan payment:
- Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of proceeds are used for the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can request 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 will be able to receive the loan payment from their PPP lender.