The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within 24 hours after the legislation was approved by the lawmaker to streamline the application process for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness by 24 days after 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 released the updated forms.”
Forgiveness terms in the first draw of PPP loans
Texas Teacher Student Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- Employee and compensation levels are ensured
- 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 the profits go towards payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified customers are qualified for loan forgiveness if the loan is paid within an 8to 24-week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the funds go to the cost of payroll
- How and when to apply for loan forgiveness?
Once all of the loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan will be able to receive loan payments from their PPP lender.
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