The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to 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 in funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Pheaa Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- The levels of compensation and employee pay are ensured
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24-week period.
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds could be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- How do I request loan forgiveness and when
A borrower may apply for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the period covered the PPP loans are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.
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