The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being signed into law to simplify the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one-page form for PPP loan forgiveness within 24 days 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 more updated forms.”
Forgiveness terms for the first draw of PPP loans
Public Student Loan Forgiveness Form – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8-to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
After all loan proceeds have been used The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.