The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 days of the date of the enactment of 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 new forms.”
First Draw PPP Terms of loan forgiveness
Federal Loan Forgiveness Program – For borrowers who are eligible, First Draw PPP loans can be suitable to be forgiven. This is if the loan disbursement occurs within an 8 to 24-week period.
- It’s the same for compensation and employees.
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for 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 period.
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
- How do I request loan forgiveness and when to apply
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.