The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month, which included $284 billion of financing to small businesses that needed loans. This money was used to offset the economic impact of the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned companies that had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing 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 at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published the updated forms.”
First Draw PPP Conditions for loan forgiveness
Will They Forgive Student Loans – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24 week period that follows loan disbursement:
- Pay and worker levels are ensured
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans for eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are spent on payroll and other expenses that are eligible and
- Minimum 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loan payments can no longer deferred, and the borrower will be required to make loan payments to their PPP lender.