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 to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness, along with conditions designed to facilitate more bank loans by community banks, particularly for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for loan forgiveness under the PPP within 24 days 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 published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
What Is Federal Student Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be eligible to be forgiven. This happens if the loan disbursement occurs within an 8– to 24 week period.
- The levels of compensation and employee pay are ensured
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- A minimum of 60% of profits are used for the cost of payroll
- 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 has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loans are no longer deferred, and borrowers must make payment to their PPP lender.