The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-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 more updated forms.”
First Draw PPP Loan forgiveness terms
PPP Loan Forgiveness Formula – For those who qualify, First Draw PPP loans are eligible for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- It’s the same for employee compensation and the.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week covered period following loan disbursement:
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- Minimum 60% of proceeds go to the cost of payroll
- How to apply for loan forgiveness , and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loan payments are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.