The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 hours of 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 published the updated forms.”
Terms for forgiveness for the first draw of PPP loans
How Does Obama Student Loan Forgiveness Work – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24-week period after the loan’s disbursement
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week time period after loan payment:
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds are used for the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower may apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive payment from their PPP lender.