The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Federal Student Loan Forgiveness For Nonprofit Employees – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8- 24 week time frame.
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.