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 that are in line with the current stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the bill being adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, especially for minority-owned businesses that 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 by 24 days after the date of the 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 more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Forgiveness Of Loans Form – For those who qualify, First Draw PPP loans can be suitable for loan forgiveness. This applies when the loan is disbursed within an 8 to 24-week period.
- Employee and compensation levels are kept at a constant level.
- The proceeds from the loan may be used to pay the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week time period after the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the identical manner.
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- At least 60% of profits are used to pay for payroll expenses
- How and when to apply for loan forgiveness?
When all of the loan funds have been utilized The borrower may apply to be forgiven. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the time period that was covered the PPP loan payments are not deferred any longer, and the borrower will be required to make loan payments to their PPP lender.