The U.S. Small Business Administration has released a 1-page form that makes it easier to apply 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 in funds for small businesses that want forgiven loans to help cope with the economic fallout from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for the forgiveness of PPP loans by 24 days after the date of enactment 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 new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Forgivness Loan – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following loan disbursement:
- It’s the same for pay and benefits for employees.
- The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans for eligible borrowers are eligible for loan repayment when the loan is paid within an 8– to 24-week time frame.
- Pay and worker levels are maintained in the same manner in accordance with the First Draw PPP loan
- The loan funds can be used to pay payroll costs or other expenses that are eligible.
- Minimum 60% of proceeds go to payroll costs
- When and how do I apply for loan forgiveness?
A borrower may apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan will be able to receive loan payments from their PPP lender.