What Are The New Rules For Ppp Loan Forgiveness

What Are The New Rules For Ppp Loan Forgiveness

The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that conform to the requirements of the most recent stimulus legislation. 

Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses in need of loans. The money was intended to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, especially for minority-owned businesses who had trouble getting loans in the past.

What Are The New Rules For Ppp Loan Forgiveness

“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 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 additional updated forms.”

Terms for forgiveness for the initial draw of PPP loans

What Are The New Rules For Ppp Loan Forgiveness – For those who qualify First Draw PPP loans are suitable to be forgiven. This happens when the loan is disbursed within an 8 to 24-week period.

  • Employee and compensation levels are kept at a constant level.
  • The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
  • At least 60% of profits are spent on payroll costs

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement

  • The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
  • The loan proceeds could be used to pay payroll costs or other expenses that are eligible.
  • At least 60% of proceeds go to payroll costs
  • How to apply for loan forgiveness and the time to apply

A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loan payments are no longer deferred and the borrower will be required to make loan payments to their PPP lender.

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