The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of 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
Forgivable Loans For Small Business – For those who qualify First Draw PPP loans can be eligible to be forgiven. This applies if the loan disbursement occurs within an 8– to 24-week timeframe.
- The same goes for the employee compensation and the.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds could be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the period covered, then PPP loan payments are no longer deferred and borrowers must make loan payments to their PPP lender.