The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans, especially 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 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 more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Forgivable Business Loans – For borrowers who are eligible, First Draw PPP loans are suitable for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week period.
- It’s the same for compensation and employees.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of profits are used for the cost of payroll
- How to apply for loan forgiveness , and the time to apply
Once all of the loan funds have been utilized the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the last day of the period covered the PPP loan payments can no longer deferred, and borrowers will begin making payment to their PPP lender.
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