The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, especially for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans by 24 days after 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 published new forms.”
First Draw PPP Conditions for loan forgiveness
Loan Forgiveness Mn – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so during the 8- to 24-week covered period following the loan’s disbursement
- This is also true for employee compensation and the.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.
- The levels of compensation and employee pay 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 for payroll costs or other eligible expenses.
- A minimum of 60% of the profits go towards payroll costs
- How to request loan forgiveness and when
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness at any time prior to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the period covered, then PPP loan payments can not deferred any longer, and borrowers must make payment to their PPP lender.