The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with revised and updated forms to conform to the requirements of the latest stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days after the legislation was signed into law to simplify the procedure of applying for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses who were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness 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 issued more updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Bernie Sanders Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8to 24-week duration following loan payment:
- Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
- How to apply for loan forgiveness and the time to apply
After all loan funds have been utilized, a borrower can apply to be granted forgiveness. The borrower can request forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 months of the date of expiration of the covered period and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.