The U.S. Small Business Administration released a one-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness by 24 days after 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 more updated forms.”
First Draw PPP Conditions for loan forgiveness
PPP Loan Forgiveness Application Options – For eligible borrowers, First Draw PPP loans are eligible to be forgiven. This happens when the loan is disbursed within an 8– to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The loan funds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of the proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- At least 60% of profits go towards expenses for payroll
- How to request loan forgiveness and when
A borrower can apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.