The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The law required that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 additional updated forms.”
First Draw PPP Conditions for loan forgiveness
How Likely Is Student Loan Forgiveness – For those who qualify First Draw PPP loans can be eligible to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week period.
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after loan disbursement:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds go to payroll costs
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.