The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, particularly for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 hours of the date of the 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
Will College Loans Be Forgiven – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This is if the loan disbursement occurs within an 8 to 24-week timeframe.
- Pay and worker levels are kept at a constant level.
- The loan proceeds can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness when the loan is paid within an 8to 24-week period.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of proceeds are used to pay for payroll expenses
- How to apply for loan forgiveness , and the time to apply
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness any time up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.
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