The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. The law required that the SBA provide 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 to encourage community banks to lend more particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement to issue the one-page form for the forgiveness of PPP loans by 24 days after the date of the enactment of 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 issued updated forms.”
Forgiveness terms for the initial draw of PPP loans
Exemplary Assistance Student Loan Forgiveness – For those who qualify First Draw PPP loans are qualified for loan forgiveness. This is when the loan payment is made within an 8 to 24 week period.
- The same goes for the compensation and employees.
- The loan funds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible borrowers are eligible for loan repayment when the loan is paid within an 8to 24 week time frame.
- Pay and worker levels are maintained in the same manner as required for the First Draw PPP loan
- The loan funds are used on payroll expenses and other eligible expenses; and
- A minimum of 60% of the profits go towards the cost of payroll
- How to apply for loan forgiveness and when
A borrower can apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any time up to the date at which the loan matures. If the borrower does not apply for forgiveness within 10 years of the end of the time period that was covered the PPP loan payments can no longer deferred and borrowers must make loan payments to their PPP lender.