The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 days of the bill being adopted to make the application process for forgiveness, along with conditions meant to encourage more loans from community banks, specifically for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours 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 released new forms.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness Act Passed By Congress – For borrowers who are eligible First Draw PPP loans can be qualified for loan forgiveness. This is when the loan payment is made within an 8– to 24-week period.
- Pay and worker levels are ensured
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week duration following loan payment:
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 years of the last day of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.