The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March and offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. It included a requirement for the SBA to issue simplified forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more loans from community banks, particularly for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans 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 the updated forms.”
Forgiveness terms in the initial draw of PPP loans
Acs Loan Forgiveness Form – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24 week period that follows the disbursement of loan:
- Pay and worker levels are maintained
- The proceeds from the loan may be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the compensation and employee levels be maintained in an exactly the same manner.
- The loan proceeds can be used to pay expenses for payroll or other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been used. Borrowers are able to apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months of the last day of the time period that was covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.