The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law required that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
“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 who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released the updated forms.”
First Draw PPP Conditions for loan forgiveness
Student Loan Forgiveness Cares Act – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows the disbursement of loan:
- It’s the same for employee compensation and the.
- The loan proceeds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to qualified borrowers can be eligible for loan forgiveness when the loan is repaid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan funds can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the funds go to the cost of payroll
- How to apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.