The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the most recent stimulus law.
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 reduce the economic burden of the coronavirus outbreak. The law required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 hours of the date of the 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 issued more updated forms.”
First Draw PPP Terms of loan forgiveness
Will Student Loans Ever Be Forgiven – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8-to 24-week period after loan disbursement:
- It’s the same for compensation and employees.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the identical manner.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers can request forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 months of the end date of the loan are eligible to receive payment from their PPP lender.