The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that 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 in need of loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness by 24 days after 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 published more updated forms.”
First Draw PPP Terms of loan forgiveness
Government Forgivable Loans – For eligible borrowers First Draw PPP loans are eligible to be forgiven. This happens when the loan payment is made within an 8– to 24-week period.
- The same goes for the employee compensation and the.
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of profits go towards payroll costs
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 duration following loan disbursement:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds can be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date of maturity. If the borrower does 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 can not deferred any longer, and the borrower will be required to make payment to their PPP lender.