The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 days 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 published new forms.”
Forgiveness terms for the first draw of PPP loans
Pheaa Student Loan Forgiveness – For those who qualify, First Draw PPP loans can be suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24-week period.
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers are qualified for loan forgiveness if the loan is paid within an 8– to 24-week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds could be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan will be able to receive payment from their PPP lender.