The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus law.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the application process for forgiveness, along with conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 days 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 updated forms.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Non Profit Form – For borrowers who are eligible First Draw PPP loans are suitable to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan proceeds could be used to pay payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
- How do I apply for loan forgiveness , and when to apply
A borrower can apply for forgiveness after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments can not deferred any longer, and borrowers must make loan payments to their PPP lender.