The U.S. Small Business Administration has issued a one-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus law.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiveness loans to help them to deal with the effects of economic collapse of the coronavirus epidemic. It also included a requirement that the SBA to issue streamlined forms within 24 days of the legislation being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned companies that 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 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Federal Loan Forgiveness Program Form – For borrowers who are eligible, First Draw PPP loans are eligible for loan forgiveness. This applies when the loan payment is made within an 8– to 24-week timeframe.
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week duration following loan payment:
- Employee and compensation levels are kept in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the last day of the covered period, then PPP loan payments can not deferred any longer, and the borrower will be required to make monthly payments to their PPP lender.