The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, specifically for minority-owned companies that struggled to get loans last year.
“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 days of the date of enactment 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 released new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
Will Student Loan Debt Be Forgiven – For those who qualify First Draw PPP loans are suitable for loan forgiveness. This applies when the loan is disbursed within an 8– to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the profits go towards payroll costs
- What is the best time to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers may apply for forgiveness at any time until the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive loan payments from their PPP lender.