The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the current stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 days of the legislation being adopted to make the application process for forgiveness, along with conditions designed to facilitate more bank loans by community banks, especially for minority-owned companies that had trouble getting loans in the past.
“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 new forms.”
First Draw PPP Terms of loan forgiveness
Elizabeth Warren Student Loan Forgiveness Plan – 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 loan disbursement:
- The levels of compensation and employee pay are maintained
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are eligible for loan forgiveness if the loan is paid within an 8– to 24-week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
The borrower is eligible for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. Borrowers can request forgiveness at any time until the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the date of expiration of the period covered, then PPP loan payments are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.