The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month and included $284 billion of financing to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. 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, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans by 24 days after the date of 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 published new forms.”
Forgiveness terms in the first draw of PPP loans
Student Loan Forgiveness Criteria – For eligible borrowers, First Draw PPP loans are qualified to be forgiven. This applies when the loan is disbursed within an 8 to 24-week period.
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll and other eligible expenses; and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24 week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of the proceeds go to expenses for payroll
- When and how do I apply for loan forgiveness
After all loan funds have been utilized The borrower may apply to be granted forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 month of the end date of the loan are eligible to receive the loan payment from their PPP lender.