The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month that provided $284 billion of funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness by 24 days after the date of enactment 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 updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Ways To Get Student Loan Debt Forgiven – 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 levels of compensation and employee pay are ensured
- The loan proceeds can be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan funds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of funds go to the cost of payroll
- How do I apply for loan forgiveness and when to apply
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.