The U.S. Small Business Administration has released a single-page form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release 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, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
Terms for forgiveness for the first draw of PPP loans
William D Ford Federal Direct Loan Program Loan Forgiveness – For those who qualify, First Draw PPP loans can be qualified to forgive loans. This applies when the loan payment is made within an 8– to 24-week period.
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to pay payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness if 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 proceeds of the loan could be used to cover payroll costs or other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
- How to apply for loan forgiveness and when to apply
When all of the loan’s proceeds have been used the borrower is eligible to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered, then PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.