The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This is to make it easier to apply for forgiveness. Additionally, it included conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 days of 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 issued additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
10 000 Student Loan Forgiveness – For eligible borrowers First Draw PPP loans can be eligible for loan forgiveness. This applies if the loan disbursement occurs within an 8 to 24-week timeframe.
- Pay and worker levels are ensured
- The loan funds are used on payroll costs and other eligible expenses; and
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible customers are eligible for loan forgiveness if the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exactly the same manner.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits are used to pay for payroll expenses
- How to apply for loan forgiveness and the time to apply
A borrower can apply for forgiveness only after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive payment from their PPP lender.