The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 days after the legislation was adopted to make the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness by 24 days after the date of enactment 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 updated forms.”
First Draw PPP Loan forgiveness terms
Earnest Loan Forgiveness – For those who qualify, First Draw PPP loans can be qualified to be forgiven. This is when the loan is disbursed within an 8– to 24-week period.
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay for payroll costs 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 total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the proceeds go to expenses for payroll
- How and when to apply for loan forgiveness
After all loan funds have been utilized The borrower may apply to be granted forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making payment to their PPP lender.