The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one-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 at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued updated forms.”
Forgiveness terms in the first draw of PPP loans
President Obama Student Loan Forgiveness – For those who qualify, First Draw PPP loans are suitable for loan forgiveness. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- This is also true for employee compensation and the.
- The loan proceeds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- A minimum of 60% of the funds go to payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan are eligible to receive loan payments from their PPP lender.