The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours of the date of the enactment of 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 additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Government Loan Forgiveness Program For Teachers – 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:
- It’s the same for compensation and employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan repayment when the loan is repaid within an 8to 24-week period.
- Pay and worker 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
- At least 60% of proceeds go to expenses for payroll
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the last day of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and borrowers will begin making payment to their PPP lender.