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.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, especially for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue 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, a partner with 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 If College Closed – For those who qualify, First Draw PPP loans are qualified to forgive loans. This is when the loan payment is made within an 8 to 24-week period.
- Pay and worker levels are maintained
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- At least 60% of proceeds are spent on payroll costs
- 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 can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan will be able to receive loan payments from their PPP lender.