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 for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness. The legislation also contained conditions designed to facilitate more loans from 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 one page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 issued updated forms.”
Terms for forgiveness for the first draw of PPP loans
PPP Loan Forgiveness Application Instructions Ez – For eligible borrowers, First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8– to 24 week period.
- The same goes for the compensation and employees.
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers are eligible for loan repayment if the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds can be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
- How do I apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any time up to the date of maturity. If the borrower does not apply 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 payment to their PPP lender.