The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of the 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 issued new forms that were updated.”
Forgiveness terms for the first draw of PPP loans
Student Loan Forgiveness Tax Free – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows loan disbursement:
- This is also true for employee compensation and the.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
- Minimum 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness?
When all of the loan proceeds have been used, a borrower can apply to be forgiven. The borrower can request forgiveness any time up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.