The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, as well as newly updated and revised forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. The law requires that the SBA issue simplified forms within 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. The legislation also contained conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for the forgiveness of PPP loans within 24 days of the date of the 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 published the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Federal Loan Forgiveness Certification Form – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if within the 8 to 24-week covered period following the disbursement of loan:
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible customers are qualified for loan forgiveness if the loan is paid within an 8to 24-week time frame.
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the funds go to payroll costs
- How do I apply for loan forgiveness and the time to apply
After all loan proceeds have been used the borrower is eligible to be granted forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If they do not file for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred and borrowers will begin making monthly payments to their PPP lender.