The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness 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 published new forms.”
Forgiveness terms for the initial draw of PPP loans
Is Student Loan Forgiveness In The New Stimulus Bill – For borrowers who are eligible, First Draw PPP loans are suitable to forgive loans. This applies when the loan payment is made within an 8– to 24-week period.
- This is also true for compensation and employees.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Terms of Loan Forgiveness
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 disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the last day of the time period that was covered the PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.