The U.S. Small Business Administration has released a single-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 comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
“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 enactment 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 released the updated forms.”
Forgiveness terms in the first draw of PPP loans
Military Student Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- The same goes for the compensation and employees.
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment if the loan is paid within an 8– to 24 week period.
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds are used for the cost of payroll
- How do I apply for loan forgiveness , and when to apply
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.