The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to lend more, especially to minority-owned businesses who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of the 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 issued more updated forms.”
First Draw PPP Loan forgiveness terms
1 Page PPP Loan Forgiveness Application – For eligible borrowers, First Draw PPP loans can be eligible to forgive loans. This happens when the loan payment is made within an 8- to 24-week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week duration following loan disbursement:
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses as well as other eligible expenses and
- At least 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. If they do not file for forgiveness within 10 years of the last day of the time period that was covered the PPP loan payments are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.