The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses that needed loans. This money was used to reduce the economic burden of the coronavirus epidemic. The package also mandated the SBA to issue simplified forms within 24 days of the legislation being signed into law to simplify the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement of releasing 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, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Corinthian Colleges Loan Forgiveness Form – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are ensured
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are spent on payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to qualified customers are eligible for loan forgiveness when the loan is repaid within an 8to 24-week period.
- The levels of compensation and employee pay are kept in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll and other eligible expenses; and
- At least 60% of funds go to payroll costs
- How do I request loan forgiveness and the time to apply
A borrower may apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 years of the last day of the covered period, then PPP loan payments are no longer deferred and borrowers must make payment to their PPP lender.