The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness by 24 days after the date of enactment 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 released updated forms.”
First Draw PPP Conditions for loan forgiveness
10 Year Loan Forgiveness Calculator – For those who qualify, First Draw PPP loans are qualified for loan forgiveness. This applies if the loan disbursement occurs within an 8– to 24-week period.
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- At least 60% of proceeds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels are maintained in the identical manner.
- The loan proceeds could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are able to receive payment from their PPP lender.