The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 days of the date of 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 the updated forms.”
First Draw PPP Conditions for loan forgiveness
Parent Plus Loan Forgiveness Program – For those who qualify First Draw PPP loans are suitable to forgive loans. This happens when the loan is disbursed within an 8– to 24 week period.
- Pay and worker levels are ensured
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used to pay for payroll expenses
- How to request loan forgiveness and when to apply
A borrower may apply for forgiveness once all loan proceeds to which the borrower wants 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 expiration date of the loan will be able to receive loan payments from their PPP lender.