The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus law.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was to facilitate the application for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.
“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 more updated forms.”
Forgiveness terms in the initial draw of PPP loans
For Profit College Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after the disbursement of loan:
- This is also true for employee compensation and the.
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8– to 24 week time frame.
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exact same way.
- The loan proceeds could be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of proceeds are spent on payroll costs
- When and how do I apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can apply for forgiveness at any time until the date at which the loan matures. Borrowers who do not request forgiveness within 10 month of the end date of the loan will be able to receive the loan payment from their PPP lender.