The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the most recent stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, especially for minority-owned businesses that had trouble getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of 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 released the updated forms.”
Forgiveness terms in the first draw of PPP loans
Capital One PPP Loan Forgiveness Application – For eligible borrowers, First Draw PPP loans can be suitable to be forgiven. This applies when the loan payment is made within an 8 to 24-week timeframe.
- Employee and compensation levels are ensured
- The proceeds of the loan can be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week time period after the loan’s disbursement
- Pay and worker levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs as well as other eligible expenses and
- A minimum of 60% of the funds go to expenses for payroll
- How do I apply for loan forgiveness and when
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers can apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period the PPP loan payments can not deferred any longer, and borrowers will begin making loan payments to their PPP lender.