The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for loan forgiveness under the PPP within 24 days of the date of 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 released the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Federal Student Loan Forgiveness Calls – For borrowers who are eligible First Draw PPP loans are qualified to forgive loans. This applies if the loan disbursement occurs within an 8– to 24 week period.
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll and other eligible expenses; and
- At least 60% of funds go to payroll costs
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans for eligible borrowers can be qualified for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exactly the same manner.
- The loan funds can be used to cover expenses for payroll or other eligible expenses.
- At least 60% of profits are spent on payroll costs
- What is the best time to apply for loan forgiveness
A borrower may apply for forgiveness only after all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. If they do not file for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.