The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. It also included conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of enactment of 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 published more updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Meme – First Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8 to 24 week period that follows the loan’s disbursement
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is paid within an 8– 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exact same way.
- The loan funds are used on payroll costs and other eligible expenses; and
- At least 60% of the profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.