The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one-page form for loan forgiveness under the PPP 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 new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Public Employment Student Loan Forgiveness Form – For those who qualify First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8 to 24-week period.
- This is also true for employee compensation and the.
- The proceeds from the loan may be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan could be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
- How to apply for loan forgiveness and the time to apply
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date of the loan. 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.