The U.S. Small Business Administration released a one-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at 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
Student Loan Debt Forgiveness Taxable – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness during the 8- to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds from the loan may be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers can be eligible for loan repayment when the loan is repaid within an 8to 24 week period.
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds could be used to pay for expenses for payroll or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
The borrower is eligible for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month of the end date of the loan are able to receive payment from their PPP lender.