The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus outbreak. The legislation required that the SBA provide simplified forms within the first 24 hours of the signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of 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 released more updated forms.”
Terms for forgiveness for the first draw of PPP loans
What Does Student Loan Forgiveness Mean – For those who qualify, First Draw PPP loans are suitable to be forgiven. This applies when the loan is disbursed within an 8 to 24 week period.
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to payroll costs
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 8to 24-week covered period following loan disbursement:
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds can be used to pay payroll costs or other expenses that are eligible.
- At least 60% of the profits are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any time until the date of maturity. If the borrower does not apply for forgiveness within 10 years of the last day of the period covered, then PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.
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