The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, as well as 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 funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage banks in the community 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 loan forgiveness under the PPP by 24 days after 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 released updated forms.”
First Draw PPP Conditions for loan forgiveness
How To Apply For Ppp Loan Forgiveness – For eligible borrowers, First Draw PPP loans are qualified to be forgiven. This applies if the loan disbursement occurs within an 8 to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- Minimum 60% of funds go to payroll costs
- How and when to apply for loan forgiveness
When all of the loan proceeds have been used The borrower may apply to be granted forgiveness. The borrower can request forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the end of the time period that was covered the PPP loan payments are not deferred any longer, and borrowers must make monthly payments to their PPP lender.