The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of 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. This money was used to reduce the economic burden of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release 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 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.”
First Draw PPP Conditions for loan forgiveness
Not For Profit Student Loan Forgiveness Form – For those who qualify, First Draw PPP loans are suitable for loan forgiveness. This applies when the loan payment is made within an 8– to 24-week period.
- The same goes for the compensation and employees.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is paid within an 8to 24 week period.
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the profits are spent on payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the covered period and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers will begin making payment to their PPP lender.