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. It also includes newly revised forms that comply with the latest stimulus law.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain 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 published updated forms.”
First Draw PPP Conditions for loan forgiveness
Did Biden Forgive Student Loans – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are maintained
- The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
- Minimum 60% of funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds go to the cost of payroll
- How and when to apply for loan forgiveness?
Once all of the loan proceeds have been used the borrower is eligible for forgiveness. 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 of the last day of the period covered the PPP loans are not deferred any longer, and borrowers must make monthly payments to their PPP lender.