The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 days of the date of the 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 that were updated.”
First Draw PPP Terms of loan forgiveness
Studentaid Ed Gov Sa Repay Loans Forgiveness Cancellation Public Service – For eligible borrowers, First Draw PPP loans can be eligible for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week timeframe.
- Employee and compensation levels are ensured
- The proceeds from the loan may be used to cover payroll costs or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week covered period following loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- A minimum of 60% of proceeds are spent on payroll costs
- What is the best time to apply for loan forgiveness
After all loan funds have been utilized, a borrower can apply to be forgiven. Borrowers may apply for forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the date of expiration of the period covered the PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.