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. The form is also updated with new forms that are in line with the latest stimulus legislation.
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 funds were used to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the process of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, specifically for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans 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 new forms.”
First Draw PPP Loan forgiveness terms
Harvest Ppp Loan Forgiveness – For borrowers who are eligible, First Draw PPP loans are qualified to forgive loans. This happens when the loan payment is made within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week time period after the loan’s disbursement
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- Minimum 60% of proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness?
After all loan’s proceeds have been used the borrower is eligible to be forgiven. Borrowers can apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the covered period the PPP loan payments can no longer deferred and the borrower will be required to make payment to their PPP lender.