The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours 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, particularly for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 hours of 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 updated forms.”
First Draw PPP Conditions for loan forgiveness
Public Student Loan Forgiveness Anuall Employer Certification Form – For those who qualify First Draw PPP loans can be suitable for loan forgiveness. This is when the loan payment is made within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness any time up until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the end of the time period that was covered, then PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.