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 to forgive Paycheck Protection Program loans, as well as newly updated and revised forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the application process for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness by 24 days after 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 released additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Who Will Pay For Student Loan Forgiveness – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- Pay and worker levels are kept at a constant level.
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- At least 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans for eligible customers are qualified for loan forgiveness if the loan is paid within an 8to 24-week period.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The loan proceeds are spent on payroll and other eligible expenses; and
- A minimum of 60% of the proceeds go to payroll costs
- What is the best time to apply for loan forgiveness
After all loan proceeds have been used, a borrower can apply to be forgiven. Borrowers can request forgiveness at any point up to 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, then PPP loan payments are not deferred any longer, and borrowers must make monthly payments to their PPP lender.
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