The U.S. Small Business Administration released a one-page form that aims to simplify the application process for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the legislation being signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, specifically for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of enactment of 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 published updated forms.”
First Draw PPP Conditions for loan forgiveness
Who Qualifies For Student Loan Forgiveness Act – For those who qualify, First Draw PPP loans can be qualified for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are maintained
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified customers are eligible for loan repayment when the loan is paid within an 8– to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
- How do I request loan forgiveness and when
After all loan’s proceeds have been used The borrower may apply to be granted forgiveness. Borrowers can request forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the last day of the period covered, then PPP loan payments can no longer deferred, and borrowers must make monthly payments to their PPP lender.