The U.S. Small Business Administration released a one-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP 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 issued new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Sallie Mae Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible for loan forgiveness. This happens when the loan is disbursed within an 8 to 24 week period.
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay expenses for payroll or other eligible expenses.
- 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 if the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The proceeds of the loan could be used to cover expenses for payroll or other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months of the last day of the period covered, then PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.