The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
The COVID-19 relief package that Congress adopted 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. The law requires that the SBA release simplified forms within the first 24 hours of the signing into law. This was to make it easier to apply for forgiveness. The legislation also contained conditions to encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with 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
Who Qualifies For Loan Forgiveness – For eligible borrowers, First Draw PPP loans are suitable for loan forgiveness. This happens when the loan is disbursed within an 8– to 24-week timeframe.
- The same goes for the pay and benefits for employees.
- The loan proceeds are spent on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards expenses for payroll
- How to request loan forgiveness and the time to apply
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive the loan payment from their PPP lender.