The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within 24 hours of the bill being adopted to make the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, especially 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 loan forgiveness under the PPP by 24 days after the date of 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 additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Guaranteed Student Loan Forgiveness For Disability Forms – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8 to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 years of the date of expiration of the period covered the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.