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, as well as newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans specifically to minority-owned companies who were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 hours of the date of enactment of 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 new forms.”
Terms for forgiveness for the initial draw of PPP loans
Do I Qualify For Student Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8 to 24-week period after loan disbursement:
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay payroll costs or other eligible expenses.
- A minimum of 60% of the funds go to payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week duration following loan payment:
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are used on payroll expenses as well as other eligible expenses and
- Minimum 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness?
A borrower can apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been used. The borrower can request forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan are eligible to receive payment from their PPP lender.