The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus law.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for the forgiveness of PPP loans within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Graduate Nursing Student Loan Forgiveness – For borrowers who are eligible First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8– to 24-week timeframe.
- Pay and worker levels are maintained
- The loan funds are used on payroll and other expenses that are eligible and
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans to eligible customers are eligible for loan forgiveness when the loan is paid within an 8to 24-week time frame.
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of proceeds go to expenses for payroll
- How and when to apply for loan forgiveness
When all of the loan proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness anytime up until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months of the end date of the loan will be able to receive the loan payment from their PPP lender.