The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the latest stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout from the coronavirus pandemic. The law required that the SBA issue simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. The legislation also contained conditions that encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP within 24 hours of 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 the updated forms.”
First Draw PPP Terms of loan forgiveness
Doj Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week covered period following the loan’s disbursement
- Pay and worker levels are kept at a constant level.
- The loan funds are used on payroll costs as well as other expenses eligible for reimbursement; and
- Minimum 60% of profits go towards the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is paid within an 8– to 24-week time frame.
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the exact same way.
- The loan funds are used on payroll expenses as well as other eligible expenses and
- At least 60% of the profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
After all loan proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any point up to the date of maturity. If the borrower does not apply for forgiveness within 10 years of the end of the period covered and the loan is not renewed, PPP loan payments can no longer deferred, and borrowers must make payment to their PPP lender.