The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 days 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 issued new forms.”
Forgiveness terms in the initial draw of PPP loans
Obama Student Loan Forgiveness Act 2022 – For those who qualify, First Draw PPP loans can be eligible for loan forgiveness. This is when the loan is disbursed within an 8– to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay for payroll costs or other eligible expenses.
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness if the loan is paid within an 8– 24-week time frame.
- The levels of compensation and employee pay are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll as well as other eligible expenses and
- At least 60% of profits go towards payroll costs
- How do I apply for loan forgiveness and the time to apply
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 month of the end date of the loan are able to receive loan payments from their PPP lender.