The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus law.
The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the process of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, especially for minority-owned companies that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”
Forgiveness terms in the initial draw of PPP loans
Student Loan Forgiveness Reddit – For those who qualify, First Draw PPP loans are suitable to forgive loans. This applies if the loan disbursement occurs within an 8– to 24 week period.
- This is also true for pay and benefits for employees.
- The loan proceeds are spent on payroll and other eligible expenses; and
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the identical manner.
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months of the end of the period covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.