The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that provided $284 billion of funding for small-scale businesses who needed loans. This money was used to mitigate the economic effects of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that struggled to get loans last year.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published more updated forms.”
Forgiveness terms for the first draw of PPP loans
Ppp Loan Forgiveness Worksheet – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24 week period that follows the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- Minimum 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan funds could be used to pay payroll costs or other eligible expenses.
- At least 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.