The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one 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 released more updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness For Healthcare Workers – For borrowers who are eligible, First Draw PPP loans are suitable to be forgiven. This applies when the loan is disbursed within an 8 to 24-week period.
- This is also true for compensation and employees.
- The loan proceeds are used on payroll and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months of the last day 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.