The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus law.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus outbreak. The package also mandated the SBA to issue streamlined forms within 24 hours of the legislation being approved by the lawmaker to streamline the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that struggled to get loans in the past.
“The Small Business Administration met the requirements to release the one page form for PPP loan forgiveness within 24 days of the date of the enactment of 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 published additional updated forms.”
Terms for forgiveness for the initial draw of PPP loans
Biden Drops Student Loan Forgiveness – First Draw PPP loans given to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24 week period that follows the loan’s disbursement
- This is also true for employee compensation and the.
- The loan proceeds can be used to pay expenses for payroll or other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
- How to apply for loan forgiveness and when
The borrower is eligible for forgiveness after all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can request forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months of the end of the covered period, then PPP loan payments can not deferred any longer, and borrowers will begin making payment to their PPP lender.