The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that included $284 billion of financing to small businesses in need of loans. This money was used to mitigate the economic effects of the coronavirus outbreak. The legislation required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to simplify the process of applying for forgiveness. It also 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 to issue the one-page form for the forgiveness of PPP loans within 24 hours 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 released new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Forgivable Loan Program – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8-to 24-week period after the loan’s disbursement
- The same goes for the pay and benefits for employees.
- The loan funds are used on payroll as well as other expenses eligible for reimbursement; and
- At least 60% of profits are used for the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 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 and other expenses that are eligible and
- At least 60% of proceeds go to payroll costs
- How to apply for loan forgiveness and when
A borrower can apply for forgiveness after all loan proceeds to which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness anytime up to the maturity date of the loan. Borrowers who don’t request forgiveness within 10 months of the end date of the loan are able to receive the loan payment from their PPP lender.