The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours of the signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“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 of 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 published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
How To Forgive Ppp Loan – For borrowers who are eligible First Draw PPP loans are qualified to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8– 24-week period.
- Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- At least 60% of profits go towards the cost of payroll
- How do I apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.