The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. It also includes newly 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 funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses that were unable to obtain loans last year.
“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 enactment 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 issued new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Where To Mail Public Service Loan Forgiveness Form – For borrowers who are eligible, First Draw PPP loans can be eligible to forgive loans. This happens when the loan payment is made within an 8 to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The loan proceeds are spent on payroll and other expenses that are eligible and
- A minimum of 60% of the proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
- The loan funds are used on payroll costs and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the covered period the PPP loan payments are no longer deferred and the borrower will be required to make payment to their PPP lender.