The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 hours of the date of 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 issued more updated forms.”
Forgiveness terms in the initial draw of PPP loans
Department Of Education Student Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to forgive loans. This is if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness if the loan is paid within an 8to 24 week period.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
After all loan proceeds have been used The borrower may apply for forgiveness. Borrowers can request forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.