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 is also updated with new forms that are in line with the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA release simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for loan forgiveness under the PPP by 24 days after 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 issued additional updated forms.”
First Draw PPP Loan forgiveness terms
College Tuition Loan Forgiveness – First Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so within the 8 to 24-week covered period following loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for total loan forgiveness if they do so during the 8– to 24-week duration following loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an identical manner.
- The loan proceeds could be used to cover payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
A borrower may apply for forgiveness once the loan’s proceeds for which the borrower wants forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior to the maturity date of the loan. If they do not file for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and the borrower will be required to make payment to their PPP lender.