The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage community banks to make more loans 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 the forgiveness of PPP loans within 24 days of the date of enactment of 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 new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Public Service Loan Forgiveness Qualifying Employers – For borrowers who are eligible, First Draw PPP loans are suitable to forgive loans. This happens when the loan is disbursed within an 8 to 24 week period.
- This is also true for employee compensation and the.
- The loan proceeds are spent on payroll costs as well as other expenses eligible for reimbursement; and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds could be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.