The U.S. Small Business Administration has issued a one-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 current stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness. It also included conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 hours 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 released the updated forms.”
First Draw PPP Conditions for loan forgiveness
Public Servie Loan Forgiveness Forms – For those who qualify First Draw PPP loans can be eligible for loan forgiveness. This applies when the loan is disbursed within an 8– to 24 week period.
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.