The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, particularly for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of the 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 published new forms.”
Forgiveness terms in the initial draw of PPP loans
New Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week covered period following the loan’s disbursement
- The same goes for the employee compensation and the.
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds go to payroll costs
- When and how do I apply for loan forgiveness?
After all loan’s proceeds have been used the borrower is eligible to be forgiven. Borrowers can request forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the last day of the period covered the PPP loan payments can no longer deferred, and the borrower will be required to make payment to their PPP lender.