The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans by 24 days after the date of enactment 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 published additional updated forms.”
First Draw PPP Loan forgiveness terms
Edfinancial Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified to forgive loans. This applies when the loan payment is made within an 8– to 24 week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- 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 the profits go towards the cost of payroll
- How to request loan forgiveness and when
When all of the loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the covered period the PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.