The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, particularly for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans 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 published the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Due To Unemployment – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This applies if the loan disbursement occurs within an 8– to 24 week period.
- It’s the same for employee compensation and the.
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are spent on payroll costs
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 levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll and other expenses that are eligible and
- A minimum of 60% of the funds go to the cost of payroll
- What is the best time to apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. 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 months of the expiration date of the loan are eligible to receive payment from their PPP lender.