The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released additional updated forms.”
Terms for forgiveness for the first draw of PPP loans
Legitimate Student Loan Forgiveness Programs – For borrowers who are eligible First Draw PPP loans can be eligible to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week period.
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible customers are eligible for loan repayment if the loan is paid within an 8– 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the profits are used to pay for payroll expenses
- How to apply for loan forgiveness and when
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any time up to the date of maturity. If they do not file for forgiveness within 10 years of the last day of the period covered, then PPP loans are no longer deferred and borrowers will begin making monthly payments to their PPP lender.