The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with 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 financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from 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 is to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP within 24 hours of the date of enactment 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 additional updated forms.”
First Draw PPP Conditions for loan forgiveness
Slate Loan Forgiveness – For those who qualify First Draw PPP loans are suitable for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24 week period.
- Pay and worker levels are kept at a constant level.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when 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 the exactly the same manner.
- The loan proceeds could be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards the cost of payroll
- How to apply for loan forgiveness and when
When all of the loan proceeds have been used The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are no longer deferred and borrowers will begin making payment to their PPP lender.
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