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 that are in line with the most recent stimulus law.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus outbreak. The law required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. The legislation also contained conditions that encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirements to release the one-page form for the forgiveness of PPP loans within 24 hours of the date of enactment 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 the updated forms.”
Forgiveness terms in the initial draw of PPP loans
100 Forgivable Ppp Loan – For borrowers who are eligible, First Draw PPP loans are suitable to be forgiven. This is when the loan is disbursed within an 8 to 24-week timeframe.
- Employee and compensation levels are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted 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 the compensation levels be maintained in an identical manner.
- The proceeds of the loan could be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
- How do I request loan forgiveness and when
A borrower may apply for forgiveness once all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months after the date they will be able to repay the loan are eligible to receive payment from their PPP lender.