The U.S. Small Business Administration has released a 1-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus law.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them cope with the economic fallout from the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms in the first draw of PPP loans
Auto Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after loan disbursement:
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- A minimum of 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following loan payment:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan funds are used on payroll and other eligible expenses; and
- A minimum of 60% of the proceeds go to the cost of payroll
- When and how do I apply for loan forgiveness?
When all of the loan proceeds have been used, a borrower can apply to be forgiven. Borrowers can request forgiveness at any point up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive loan payments from their PPP lender.