The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that offered $284 billion in funding to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP by 24 days after 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 released new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Student Loan Forgiveness Legislation – For eligible borrowers First Draw PPP loans can be suitable to be forgiven. This is if the loan disbursement occurs within an 8 to 24 week period.
- Pay and worker levels are ensured
- The loan proceeds can be used to pay the cost of payroll as well as other eligible expenses.
- At least 60% of funds go to expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans for eligible customers are eligible for loan forgiveness when the loan is repaid within an 8to 24 week period.
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan can be used to cover payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
- 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 request forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the last day of the time period that was covered, then PPP loan payments can no longer deferred, and the borrower will be required to make loan payments to their PPP lender.