The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirements to release the one-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 who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
First Draw PPP Loan forgiveness terms
What Is Loan Forgiveness Program – For borrowers who are eligible, First Draw PPP loans can be qualified to forgive loans. This happens when the loan is disbursed within an 8 to 24 week period.
- Pay and worker levels are maintained
- The proceeds of the loan can be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8to 24-week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness?
After all loan funds have been utilized The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the period covered, then PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.