The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. 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 application process for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days 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 issued new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Student Loan Forgiveness Business – For borrowers who are eligible First Draw PPP loans are eligible to forgive loans. This is when the loan payment is made within an 8– to 24-week period.
- Employee and compensation levels are maintained
- The loan funds are used on payroll costs and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers can be qualified for loan forgiveness when the loan is repaid within an 8– to 24-week time frame.
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds could be used to cover payroll costs or other expenses that are eligible.
- At least 60% of the profits are used for the cost of payroll
- How do I apply for loan forgiveness and when to apply
After all loan’s proceeds have been used The borrower may apply for forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered, then PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.