The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness by 24 days after 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 published new forms.”
First Draw PPP Terms of loan forgiveness
Scratch Ppp Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- The same goes for the employee compensation and the.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers are eligible for loan repayment when the loan is paid within an 8to 24-week period.
- Employee and compensation levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness?
When all of the loan proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 months after the end of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.