The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to simplify the process of applying for forgiveness. Additionally, it included conditions that encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one 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 with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
First Draw PPP Loan forgiveness terms
Loan Forgiveness For Kaplan Students – For borrowers who are eligible, First Draw PPP loans are qualified to forgive loans. This applies if the loan disbursement occurs within an 8– to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of funds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week time period after loan payment:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan could be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.