The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the bill being 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, specifically for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 days 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 new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Ppp Loan Forgiveness Guidance – For eligible borrowers, First Draw PPP loans can be qualified for loan forgiveness. This happens when the loan is disbursed within an 8 to 24-week period.
- The same goes for the compensation and employees.
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
- How do I request loan forgiveness and the time to apply
A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan are able to receive loan payments from their PPP lender.