The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that encourage community banks to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released updated forms.”
Terms for forgiveness for the initial draw of PPP loans
PPP Loan Forgiveness Application 3508s Revised January 19 2021 – For those who qualify First Draw PPP loans are eligible to be forgiven. This applies when the loan is disbursed within an 8 to 24-week period.
- It’s the same for employee compensation and the.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness
After all loan funds have been utilized The borrower may apply to be granted forgiveness. Borrowers may apply for forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 years of the end of the period covered the PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.