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, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding for small-scale businesses who needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA provide simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue 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 at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released additional updated forms.”
Forgiveness terms for the first draw of PPP loans
Pslf Loan Forgiveness Form – For borrowers who are eligible First Draw PPP loans can be eligible to be forgiven. This applies when the loan payment is made within an 8 to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24-week covered period following loan payment:
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- A minimum of 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used The borrower may apply to be forgiven. Borrowers may apply for forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months after the end of the covered period, then PPP loan payments are no longer deferred, and borrowers must make monthly payments to their PPP lender.