The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness by 24 days after the date of the 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 new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
How Does Student Loan Forgiveness Work – For borrowers who are eligible First Draw PPP loans can be suitable for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- This is also true for compensation and employees.
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness
When all of the loan proceeds have been used The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.