The U.S. Small Business Administration issued a one-page application form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. It included a requirement for the SBA to issue streamlined forms within 24 hours after the legislation was adopted to make the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirement to issue 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 who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published updated forms.”
Forgiveness terms in the initial draw of PPP loans
Will Biden Forgive Private Student Loans – For borrowers who are eligible, First Draw PPP loans can be suitable to be forgiven. This is if the loan disbursement occurs within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to expenses for payroll
- How and when to apply for loan forgiveness?
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the last day of the period covered and the loan is not renewed, PPP loan payments can not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.
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