The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses in need of loans. This money was used to reduce the economic burden of the coronavirus epidemic. The law required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release 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 with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
How Does The Public Service Loan Forgiveness Program Work – First Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so during the 8- to 24-week period after the loan’s disbursement
- It’s the same for employee compensation and the.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan proceeds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness
Once all of the loan proceeds have been used, a borrower can 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 months of the end date of the loan are able to receive payment from their PPP lender.
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