The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 days after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
First Draw PPP Terms of loan forgiveness
Public Service Loan Forgiveness Form For Teachers – For those who qualify, First Draw PPP loans are eligible for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are eligible for loan repayment if the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of profits go towards payroll costs
- How and when to apply for loan forgiveness?
Once all of the loan funds have been utilized The borrower may apply to be forgiven. The borrower can request forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive the loan payment from their PPP lender.