The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the one 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, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published the updated forms.”
First Draw PPP Conditions for loan forgiveness
Sba Disaster Loan Forgiveness For Individuals – First Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24 week period that follows the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week time period after the loan’s disbursement
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- Minimum 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
After all loan proceeds have been used the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 years of the end of the period covered the PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.