The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness Biden – For eligible borrowers First Draw PPP loans can be eligible to be forgiven. This is if the loan disbursement occurs within an 8– to 24 week period.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
- How to apply for loan forgiveness , and when to apply
Once all of the loan’s proceeds have been used The borrower may apply to be forgiven. Borrowers can request forgiveness at any time until the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.