The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 released updated forms.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Forgiveness For Medical Students – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24 week period that follows the loan’s disbursement
- This is also true for pay and benefits for employees.
- The loan proceeds are used on payroll and other eligible expenses; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of funds go to payroll costs
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.