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 comply with the latest stimulus law.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The legislation required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage community banks to make more loans specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP by 24 days after the date of enactment of 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 released more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Are Student Loans Forgiven If You Become Disabled – For borrowers who are eligible, First Draw PPP loans can be suitable to be forgiven. This happens when the loan payment is made within an 8– to 24-week period.
- The levels of compensation and employee pay are kept at a constant level.
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the 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 the profits go towards the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness once all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can request forgiveness at any time until the date of maturity. If borrowers do not apply for forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.