The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month and provided $284 billion of funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. It included a requirement for 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. It also included conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness 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.”
First Draw PPP Conditions for loan forgiveness
Public Service Loan Forgiveness Income Based Repayment Form – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week covered period following loan disbursement:
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- At least 60% of the proceeds are used for the cost of payroll
- How do I apply for loan forgiveness , and when to apply
After all loan’s proceeds have been used, a borrower can apply for forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered the PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.