The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with 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 funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness by 24 days after 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 issued new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Irs Guidance On Ppp Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after loan disbursement:
- It’s the same for pay and benefits for employees.
- The proceeds from the loan may be used to pay for payroll costs or other expenses that are eligible.
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is paid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan funds are used on payroll and other eligible expenses; and
- Minimum 60% of profits go towards payroll costs
- How do I apply for loan forgiveness , and when
After all loan’s proceeds have been used The borrower may apply to be forgiven. The borrower can apply for forgiveness at any time up to the date of maturity. Borrowers who do not request forgiveness within 10 months of the end date of the loan are eligible to receive the loan payment from their PPP lender.