The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness 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 that were updated.”
Forgiveness terms in the first draw of PPP loans
Student Loan Forgiveness Tax Bomb – For borrowers who are eligible First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8 to 24-week timeframe.
- It’s the same for compensation and employees.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness 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 compensation and employee levels be maintained in an identical manner.
- The loan proceeds could be used to pay for the cost of payroll as well as other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are able to receive loan payments from their PPP lender.