The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness within 24 hours of the date of the enactment of 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 published updated forms.”
Forgiveness terms in the first draw of PPP loans
Federal Employee Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable to be forgiven. This happens if the loan disbursement occurs within an 8– to 24 week period.
- The same goes for the pay and benefits for employees.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan proceeds could be used to pay payroll costs or other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- What is the best time to apply for loan forgiveness
When all of the loan’s proceeds have been used The borrower may apply to be forgiven. The borrower can request forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan will be able to receive payment from their PPP lender.