The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing for small-scale businesses who needed loans. This money was used to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the signing into law. This was to facilitate the application for forgiveness. It also included conditions that encourage community banks to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for PPP loan forgiveness 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 issued new forms.”
Terms for forgiveness for the initial draw of PPP loans
Student Loan Forgiveness Colorado – First Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24 week period that follows loan disbursement:
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week time period after loan disbursement:
- 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 are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to payroll costs
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who do not request forgiveness within 10 months of the expiration date of the loan will be able to receive loan payments from their PPP lender.
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