The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month and provided $284 billion of funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The legislation required that the SBA issue simplified forms within 24 hours of the legislation’s signing into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-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 issued updated forms.”
Forgiveness terms for the first draw of PPP loans
Employment Verification Form Loan Forgiveness – For those who qualify First Draw PPP loans are suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- A minimum of 60% of the proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week duration following the loan’s disbursement
- Pay and worker levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of profits go towards the cost of payroll
- How do I apply for loan forgiveness , and when
After all loan proceeds have been used, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 years of the end of the covered period and the loan is not renewed, PPP loans are no longer deferred and the borrower will be required to make monthly payments to their PPP lender.