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. It also includes newly revised forms that are in line with the current stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for loan forgiveness under the PPP by 24 days after the date of enactment 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 new forms that were updated.”
First Draw PPP Loan forgiveness terms
Student Loan Form Public Forgiveness – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness if the loan is paid within an 8to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds can be used to cover the cost of payroll as well as other expenses that are eligible.
- At least 60% of the proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds to which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.