The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Government Employee Student Loan Forgiveness Application – First Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8– 24 week period.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any time until the date at which the loan matures. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan will be able to receive the loan payment from their PPP lender.