The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 hours of the legislation being signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP within 24 days of 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 updated forms.”
Forgiveness terms in the first draw of PPP loans
Fedloan Public Service Loan Forgiveness Pslf Employment Certification Form – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so during the 8- to 24 week period that follows the loan’s disbursement
- The same goes for the compensation and employees.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of profits go towards 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 repaid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are spent on payroll costs
- How to request loan forgiveness and when
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan will be able to receive payment from their PPP lender.