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. It also includes newly revised forms that are in line with the current 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. The money was intended to mitigate the economic effects of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“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 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 for the initial draw of PPP loans
Ppp Loan Forgiveness Strategy – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- This is also true for compensation and employees.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers are qualified for loan forgiveness when the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and when
After all loan proceeds have been used, a borrower can apply for forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the last day of the period covered, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.