The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for forgiveness of 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 and included $284 billion of financing to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the legislation being approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing 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 new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Marinello Student Loan Forgiveness – For eligible borrowers First Draw PPP loans can be qualified to be forgiven. This is when the loan is disbursed within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of profits 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 paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
- The loan proceeds are used on payroll and other expenses that are eligible and
- Minimum 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness
When all of the loan’s proceeds have been used the borrower is eligible for forgiveness. Borrowers can request forgiveness at any time up to the loan’s maturity date. 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.