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 to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses in need of loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more, especially to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 days of the date of enactment 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 published additional updated forms.”
Forgiveness terms in the first draw of PPP loans
Changes In Student Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted complete loan forgiveness if they do so within the 8-to 24-week covered period following the disbursement of loan:
- This is also true for employee compensation and the.
- The loan proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of proceeds are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week duration following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of profits go towards the cost of payroll
- How and when to apply for loan forgiveness
Once all of the loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the covered period, then PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.