The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which offered $284 billion in funding to small businesses in need of loans. The money was intended to mitigate the economic effects of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 days of the bill being adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses that were unable to obtain loans last year.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and wrote that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the first draw of PPP loans
Biden Public Service Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week period after the disbursement of loan:
- It’s the same for pay and benefits for employees.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- A minimum of 60% of profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are eligible for loan forgiveness if the loan is paid within an 8– to 24-week period.
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- At least 60% of the proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness
After all loan’s proceeds have been used, a borrower can apply for forgiveness. Borrowers can apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the covered period the PPP loans are not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.