The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. It also included conditions to encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP by 24 days after 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 new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Parent Plus Loan Forgiveness Covid – For borrowers who are eligible First Draw PPP loans are qualified for loan forgiveness. This happens when the loan payment is made within an 8 to 24-week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan repayment if the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- How to apply for loan forgiveness , and the time to apply
When all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers will begin making monthly payments to their PPP lender.