The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them to deal with the effects of economic collapse from the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the application process for forgiveness. The legislation also contained conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Direct Loans Teacher Forgiveness Form – First Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24-week covered period following the loan’s disbursement
- Employee and compensation levels are ensured
- The loan proceeds are used on payroll as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following the loan’s disbursement
- 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 could be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- How do I apply for loan forgiveness , and the time to apply
After all loan funds have been utilized the borrower is eligible for forgiveness. Borrowers can request forgiveness at any time until the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the time period that was covered, then PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.