The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process to forgive 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 plan last month that offered $284 billion in funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being adopted to make the process of applying for forgiveness, along with conditions designed to facilitate more loans from community banks, specifically for minority-owned companies 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 within 24 hours of 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Trump Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- The same goes for the pay and benefits for employees.
- The proceeds of the loan can be used to pay for the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan repayment if the loan is paid within an 8– to 24 week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exactly the same manner.
- The loan proceeds could be used to pay the cost of payroll as well as other eligible expenses.
- Minimum 60% of profits go towards expenses for payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months of the expiration date of the loan will be able to receive the loan payment from their PPP lender.