The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that would encourage banks in the community to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Conditions for loan forgiveness
How Can Student Loans Be Forgiven – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards expenses for payroll
- When and how do I apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.