The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage banks in the community to lend more, especially to minority-owned businesses who had a difficult time 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 days of the date of the enactment of 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 issued the updated forms.”
Forgiveness terms for the first draw of PPP loans
Loan Forgiveness Companies – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week covered period following the disbursement of loan:
- It’s the same for employee compensation and the.
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness if the loan is paid within an 8– to 24-week period.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay for the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
- How do I apply for loan forgiveness and when
After all loan funds have been utilized, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any point up to the date of maturity. If they do not file for forgiveness within 10 months of the last day of the covered period, then PPP loans are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.