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 the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP 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 published updated forms.”
Forgiveness terms for the initial draw of PPP loans
Federal Student Loan Total Forgiveness – For borrowers who are eligible First Draw PPP loans are eligible for loan forgiveness. This is when the loan payment is made within an 8 to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are qualified for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan proceeds could be used to cover expenses for payroll or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness after all loan proceeds to which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.