The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 hours of the legislation being approved by the lawmaker to streamline the process of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans by 24 days after 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 published the updated forms.”
Forgiveness terms in the initial draw of PPP loans
When Can You Get Student Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness during the 8- to 24-week period after the disbursement of loan:
- It’s the same for employee compensation and the.
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan repayment when the loan is repaid within an 8– to 24 week period.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan funds could be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
- What is the best time to 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 utilized. The borrower can apply for forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loans are not deferred any longer, and the borrower will be required to make payment to their PPP lender.