The U.S. Small Business Administration released a one-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 hours 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 issued updated forms.”
First Draw PPP Loan forgiveness terms
Forgive Ppp Loan – For those who qualify First Draw PPP loans can be qualified for loan forgiveness. This is when the loan is disbursed within an 8– to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:
- 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 could be used to pay for payroll costs or other eligible expenses.
- At least 60% of funds go to payroll costs
- How to apply for loan forgiveness and when to apply
Once all of the loan proceeds have been used The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make payment to their PPP lender.
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