The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law required that the SBA provide simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions to 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 to issue the single-page form for PPP loan forgiveness by 24 days after the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Terms for forgiveness for the first draw of PPP loans
Public Loan Service Forgiveness Employment Verification Form – For borrowers who are eligible First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are used on payroll and other expenses that are eligible and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- At least 60% of the proceeds are used for the cost of payroll
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.