The U.S. Small Business Administration released a one-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month and offered $284 billion in funding to small businesses in need of loans. This money was used to offset the economic impact of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being signed into law to simplify the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 days 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 published additional updated forms.”
Forgiveness terms in the initial draw of PPP loans
10 Year Student Loan Forgiveness Form – For those who qualify First Draw PPP loans can be eligible to forgive loans. This is when the loan payment is made within an 8 to 24-week period.
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement
- Pay and worker levels are kept in the same way as is required for the First Draw PPP loan
- The loan funds could be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits go towards the cost of payroll
- What is the best time to apply for loan forgiveness
Once all of the loan proceeds have been used The borrower may apply to be granted forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 years of the end of the covered period, then PPP loans are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.