The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the most recent stimulus law.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 days of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Devry Student Loan Forgiveness – For eligible borrowers, First Draw PPP loans are suitable to forgive loans. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds from the loan may be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive loan payments from their PPP lender.