The U.S. Small Business Administration has issued a one-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 legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for the forgiveness of PPP loans 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 additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Biden Loan Forgiveness Plan – First Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24 week period that follows loan disbursement:
- The levels of compensation and employee pay are ensured
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
- The loan funds can be used to pay the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits go towards the cost of payroll
- How to apply for loan forgiveness and when
After all loan’s proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers are able to apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan are eligible to receive loan payments from their PPP lender.