The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms that comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans by 24 days after 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 released updated forms.”
Terms for forgiveness for the first draw of PPP loans
Will Loan Forgiveness Happen – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week covered period following loan disbursement:
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to qualified borrowers are eligible for loan forgiveness when the loan is repaid within an 8– 24-week period.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of funds go to payroll costs
- How do I request loan forgiveness and when
The borrower is eligible for forgiveness once all loan proceeds for which the borrower has applied for forgiveness have been used. The borrower can request forgiveness anytime up to the maturity date 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 able to receive payment from their PPP lender.