The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March, which provided $284 billion of funding to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The package also mandated the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness. The legislation also contained conditions meant to encourage more bank loans by community banks, specifically for minority-owned businesses who struggled to get loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Biden’s Student Loan Forgiveness Plan – First Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan proceeds are used on payroll costs and other eligible expenses; and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following the loan’s disbursement
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll as well as other eligible expenses and
- Minimum 60% of profits go towards the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan funds have been utilized The borrower may apply for forgiveness. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the covered period the PPP loans are no longer deferred, and borrowers must make loan payments to their PPP lender.