The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of the 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 published updated forms.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness For Government Employees – For eligible borrowers, First Draw PPP loans are qualified for loan forgiveness. This is when the loan is disbursed within an 8– to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan funds can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds go to expenses for payroll
- How to apply for loan forgiveness , and when
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any point up to the date of maturity. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.