The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans by 24 days after the date of 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 released more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Loan Forgiveness For Preschool Teachers – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24 week period that follows the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan funds could be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the period covered the PPP loan payments are not deferred any longer, and borrowers will begin making payment to their PPP lender.