The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the process of applying for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and provided $284 billion of funding to small businesses that needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within 24 days after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days 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 released new forms that were updated.”
First Draw PPP Loan forgiveness terms
Sanford Brown Loan Forgiveness – For eligible borrowers, First Draw PPP loans can be suitable to be forgiven. This applies if the loan disbursement occurs within an 8– to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made 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 payment:
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date of maturity. If the borrower does not apply for forgiveness within 10 months of the date of expiration of the period covered and the loan is not renewed, PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.