What Is The Ppp Loan Forgiveness

What Is The Ppp Loan Forgiveness

The U.S. Small Business Administration issued a one-page application form that aims to simplify the application process to forgive Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the latest stimulus legislation. 

The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours after the bill’s passage into law. This was to simplify the process of applying for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.

What Is The Ppp Loan Forgiveness

“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 days of 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 released new forms that were updated.”

Forgiveness terms in the initial draw of PPP loans

What Is The Ppp Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24 week period that follows the disbursement of loan:

  • The same goes for the compensation and employees.
  • The proceeds from the loan may be used to pay for the cost of payroll as well as other eligible expenses.
  • At least 60% of the profits are spent on payroll costs

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans for eligible borrowers are eligible for loan repayment if the loan is paid within an 8 24 week time frame.

  • Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
  • The loan proceeds could be used to pay for expenses for payroll or other eligible expenses.
  • At least 60% of profits are used for the cost of payroll
  • What is the best time to apply for loan forgiveness?

Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can request forgiveness at any time up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the time period that was covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.

Download What Is The Ppp Loan Forgiveness

Gallery of What Is The Ppp Loan Forgiveness