The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The legislation required that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to facilitate the application for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“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 the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Ppp Loan Forgiveness Self-employed No Employees – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week covered period following loan disbursement:
- This is also true for compensation and employees.
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8to 24-week period.
- The levels of compensation and employee pay are kept in the same way in accordance with the First Draw PPP loan
- The loan funds can be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds go to expenses for payroll
- How do I apply for loan forgiveness , and when
The borrower is eligible for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.