The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions meant to encourage more loans from community banks, specifically for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of 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.”
Forgiveness terms for the initial draw of PPP loans
Ed Gov Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are eligible to forgive loans. This happens when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are ensured
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following the loan’s disbursement
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of funds go to the cost of payroll
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.