The U.S. Small Business Administration released a one-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package last month, which included $284 billion of financing to small businesses that needed loans. The funds were used to offset the economic impact of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 hours of the legislation being adopted to make the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for PPP loan forgiveness within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued updated forms.”
Forgiveness terms in the first draw of PPP loans
Fedloan Public Service Loan Forgiveness Form – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- Pay and worker levels are maintained
- The loan proceeds are spent on payroll expenses as well as other expenses eligible for reimbursement; and
- A minimum of 60% of the funds go to expenses for payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans to eligible customers are eligible for loan repayment when the loan is paid within an 8– 24 week period.
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the exact same way.
- The loan proceeds are spent on payroll as well as other eligible expenses and
- A minimum of 60% of profits are spent on payroll costs
- 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 can apply for forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 years of the end of the covered period, then PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.