The U.S. Small Business Administration has released a single-page form aimed at simplifying the application process for the forgiveness of Paycheck Protection Program loans, together with updated and revised forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more, especially to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans within 24 days of the date of enactment 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 released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
Elizabeth Warren Student Loan Forgiveness – For borrowers who are eligible First Draw PPP loans can be qualified for loan forgiveness. This applies when the loan is disbursed within an 8 to 24 week period.
- This is also true for compensation and employees.
- The proceeds of the loan can be used to pay expenses for payroll or other eligible expenses.
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans granted to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in an exact same way.
- The proceeds of the loan can be used to pay for expenses for payroll or other eligible expenses.
- A minimum of 60% of profits are used to pay for payroll expenses
- When and how do I apply for loan forgiveness
A borrower can apply for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period the PPP loan payments can no longer deferred, and borrowers will begin making loan payments to their PPP lender.